Just like Jekyll (world wheat supply) and Hyde (U.S. wheat supply), world and U.S. wheat stocks have two different stories. The world has more than adequate wheat to meet demand while the U.S. wheat supply (especially hard red winter wheat) is relatively tight.

For the 2013/14 wheat marketing year wheat production was a record 26.14 billion bushels compared to a 5-year average of 24.8 billion bushels and 2012/14 production of 24.1 billion bushels. U.S. wheat production was 2.13 billion bushels compared to a 5-year average of 2.24 billion and 2012 production of 2.27 billion bushels.

World wheat ending stocks for the 2013/14 wheat marketing year are projected to be 6.72 billion bushels compared to a 5-year average of 7.0 billion bushels and 6.46 billion bushels for 2012/14. U.S. wheat ending stocks are projected to be 575 million bushels compared to a 5-year average of 770 million bushels and last year’s 718 million bushels.

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Ending stocks for 2013/14 hard red winter (HRW) wheat are projected to be 194 million bushels compared to a 5-year average of 337 million bushels and 343 million bushels last year.

World wheat ending stocks are projected to be about 5 percent below average. U.S. wheat stocks are projected to be 25 percent below average. Hard red winter wheat stocks are projected to be 44 percent below average. With below average supply, above average prices would be expected, especially with HRW wheat

The 5-year average U.S. wheat price is $6.50. During the last five years wheat marketing years (June 1 through May 31), Oklahoma and Texas Panhandle (HRW wheat) prices have averaged about $6.30.

Oklahoma and Texas Panhandle wheat prices are currently about $6.70. Given that HRW wheat stocks are projected to be 44 percent below average, current wheat prices would be expected to be more than 6 percent above the 5-year average.

The reason may be that for the last two years corn stocks have been relatively tight and corn prices may have resulted in wheat prices being about 85 cents higher than normal. With relatively high corn stocks, corn price no longer support wheat prices.

Given relatively tight U.S. and HRW wheat stocks, the stage is set for significantly higher wheat prices. For higher prices, 2014 U.S. wheat production must be well below average.

The 2014 U.S. winter wheat crop is in relatively good conditions and planted acres are expected to be about the same or slightly higher than for 2013. Right now, the odds are that yields will be average or better, which would result in above average 2014 U.S. wheat production and higher wheat stocks.

Looking forward to the 2014/15 wheat marketing year, relatively tight wheat stocks should limit downside wheat price risk to about $5.25. U.S. wheat production of 2.3 billion bushels, a 13 billion bushel U.S. corn crop, and a 25 billion bushel world wheat crop would result in lower prices.

An $8 wheat price during the 2014/15 wheat marketing year would be the result of below average HRW, U.S. and world wheat production. Below average corn production would also support higher wheat prices.

The projected June, 2014 Oklahoma/Texas Panhandle wheat price is $6. Deviations from $6 will depend on whether Jekyll trumps Hyde (high stocks prevail) or if Hyde trumps Jekyll (low stocks prevail).

Also of interest:

The 2014 economic outlook: slow walk to recovery continues

Southwest outlook: Some relief in input prices