During the 1994/95 wheat marketing year, the U.S. exported 31.9 percent of the world’s exported wheat. The USDA projects the U.S. to export 17 percent of the world’s 2014/15 marketing year wheat exports. The U.S. is not the dominant wheat supplier it once was.

World wheat ending stocks are projected to increase for the third year in a row. The world’s “stocks-to-use” ratio (ending stocks divided by use) is projected to increase for the third year in a row. These two price factors, ending stocks and the stocks-to-use ratio, support world wheat prices lower in 2013/14 than 2012/13. Prices in 2014/15 should be slightly lower than in 2013/14.

The odds are, unless the HRW wheat crop is larger than expected, the U.S. wheat market will need to ration the tight stocks. This situation implies that HRW wheat prices may decline into the June/July time period and then increase into the fall and winter.

Remember that 2013/14 HRW wheat prices declined into the July 2013 time period and then increased into the fall and winter. This year, as it was last year, a determining factor will be the size of foreign hard wheat production.

Economic theory (the supply, demand, and price relationships) works. The markets are not being manipulated, and there is not a giant “rat hole” where a certain market sector is making millions at the expense of other market participants.

Lower prices result from increased supply. However, tight U.S. HRW wheat stocks will establish a floor price. And, the price should be above the five-year average price of $6.48.