Relative to consumption, world wheat stocks are the tightest since the 1972/73 wheat-marketing year. The stocks-to-use ratio (world wheat ending stocks divided by world wheat consumption) is projected to be 21.6 percent. This implies that at the beginning of the 2004/05-wheat harvest, there will be enough wheat in storage to meet demand for 79 days.

The U.S. wheat stocks-to-use ratio is projected to be 22.4 percent, the lowest since the 1995/96 marketing year of 19.3 percent. At the end of the 1995/96 wheat-marketing year, the stocks-to-use ratio was 15.8 percent. Wheat prices went above $7 in some locations in Oklahoma and Texas in April 1996.

The price impact of the above factors will be reflected in U.S. and world 2004/05 wheat ending stock estimates. The USDA releases the first 2004/05 marketing year estimates May 12. Ending stocks estimates are one of the easiest numbers to watch relative to wheat price direction.

United States 2004/05 wheat ending stocks will be beginning stocks plus production plus imports minus domestic use and minus exports. Beginning stocks are projected to be 531 million bushels. Production is projected to be 2.2 billion bushels and wheat imports are normally about 75 million bushels per year. Thus total 2004/05 marketing year wheat supplies are projected to be about 2.8 million bushels.

Wheat domestic use is projected to be 1.2 billion bushels this year and was 1.1 billion bushels last year. The major difference was wheat used as feed. Corn production will impact the amount of wheat used for feed during the 2004/05 marketing year. Domestic consumption is expected to be 1.2 billion bushels.

For the 2003/04 marketing year, wheat exports are projected to be 1.17 billion bushels compared to 854 million bushels last year and a 5-year average of one billion bushels. Foreign wheat production will impact U.S. wheat exports.

Higher production is projected in Europe, former Soviet Union countries and Australia. Total world wheat production is projected to be 22.1 billion bushels compared to 20.2 in 2003/04. This implies that export competition is expected to increase and U.S. wheat exports may decline to about one billion bushels.

If domestic use for the 2004/05 marketing year is 1.2 billion bushels and exports are 1.0 billion bushels, total wheat use will be 2.2 billion bushels. If total U.S. wheat supplies are 2.8 billion bushels, 2004/05 wheat-ending stocks will be 600 million bushels compared to 531 million bushels this year and a 5-year average of 665 million bushels.

United States 2003/04 wheat ending stocks are projected to be 531 million bushels and the average annual price is projected to be $3.35. Higher ending stocks imply a lower average annual price.

World wheat ending stocks are projected to increase from 4.7 billion bushels to 5.1 billion bushels compared to a 5-year average of 6.7 billion bushels. Thus, the 2004/05 world wheat stocks-to-use ratio is projected to be 28.1 percent. This is about the same as the 1995/96 marketing year stocks-to-use ratio.

Points: These numbers must be recalculated using the May 12 USDA estimates. If U.S. and world wheat ending stocks increase (especially if more than currently expected), wheat prices will decline. Current expectations are for wheat prices to peak in the June/July time period and then decline into fall and early winter.

Argentina and Australia's wheat crops also will influence wheat price trends. If the U.S and foreign wheat crops are as expected, prices may peak in June/July and then decline into October. Less than expected Argentina and/or Australian wheat production could then cause prices to increase.

Another price factor to watch will be growing conditions of the U.S. corn crop and planting conditions for the 2005 U.S. winter wheat crop. The 2004/05 is going to be a tough year for marketing analysts and producers trying to “out-guess” the market.