U.S. ending stocks for the 2013/14 wheat marketing year are projected to be 551million bushels. This will be the lowest ending stocks since the 2007/08 wheat marketing year when ending stocks were 306 million bushels and Kansas City Board of Trade wheat contract price peaked at $13.85 (Feb 2008).
The U.S. wheat ending stocks five-year average, 2009 through 2013, is 770 million bushels. Ending stocks may be categorized as below average but adequate, especially when considering world production and stocks.
The bad news is that 2013/14 world wheat production is projected to be a record 25.9 billion bushels. World wheat ending stocks are projected to be 6.36 billion bushels compared to 6.41 billion bushels for 2012/13. The five-year average is 6.9 billion bushels. Record high world wheat production will limit potentially higher wheat prices. Slightly lower projected world ending stocks will support prices.
A projected record 13.8-billion bushel U.S. corn crop will also limit higher wheat prices. Corn ending stocks for the 2013/14 marketing year are projected to be 1.8 billion bushels compared to 719 million bushels for the 2012/13 marketing year.
Tight 2012/13 corn marketing year stocks resulted in above average demand for feed wheat from June through August 2013. Relatively high 2013 corn production is expected to have a negative impact on the wheat for feed demand starting in September, 2013 and will limit wheat feed demand June through August 2014. Some estimates indicated that feed demand for wheat resulted in an 80-cent wheat price increase for 2012/13 wheat prices.
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If there is a price trend, and the price trend is normally started in late August and early September, the trend is sideways. This observation fits production and ending stocks estimates.
World wheat production was projected to be 25.76 billion bushels in the May WASDE (World Agricultural Supply and Demand Estimates) report and 25.92 billion bushels in the August report, a 0.6 percent increase.
World wheat ending stocks were projected to be 6.85 billion bushels in the May report and 6.36 billion bushels in the August report, a seven percent decline.
U.S. wheat production estimates have increased from 2.057 billion bushels in May to 2.114 billion bushels in August. U.S. wheat 2013/14 marketing year ending stocks have declined from 670 million bushels to 551 million bushels, an 18 percent decline.
Stocks normally trump production and lower stocks should result in relatively higher prices. The September WASDE report will be a trump card. By September, about 80 percent of the world wheat crop will have been harvested and the U.S. corn harvest will be in full swing.
Right now, the odds are that wheat futures contract prices have bottomed out or are near the bottom. There could be another 50 cents or so decline in futures prices and cash prices could decline because of a lower basis.
I predict that the August WASDE is positive for price and that wheat prices are near the bottom. The rub is that wheat prices will probably move sideways, in a 50-cent or so sideways pattern. Or at best, wheat prices will exhibit a slow uptrend.