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Wheat conditions imply little change in price

World wheat production for the 2008/09 wheat marketing year (June 1 through May 31) is in the bin. Demand, for all practical purposes, is known. Now, the most important price factors are the winter wheat planted acres and condition of the winter wheat crops. Other price factors include corn and soybean prices, oil prices and the value of the U.S. dollar against other major currencies.

Current information indicates that U.S. and world wheat production will be lower in 2009/10 than during the 2008/09 wheat marketing year. Production may be less than use and stocks may decline. For U.S. wheat ending stocks to reach the five-year average, 2009/10 U.S. wheat production needs to be 150 million bushels less than consumption.

The USDA estimated that 2009/10 marketing year U.S. winter wheat planted acres are 9 percent less than acres planted for the 2008/09 marketing year. Hard red winter (HRW) wheat planted acres are estimated to be 30.2 million acres, 4 percent less than last year. HRW wheat planted acres comprise 75 percent of all U.S. winter wheat.

Soft red winter (SRW) wheat planted acres were 26 percent less than last year. The 8.3 million SRW planted acres involve 21 percent of U.S. winter wheat planted acres.

White wheat’s 3.6 million planted acres is 1 percent less than last year and makes up 9 percent of all U.S. winter wheat planted acres.

For the 2008/09 marketing year winter wheat crop, 46.3 million acres were planted. The five-year average is 43.1 million acres. Per-acre yield for 2008/09 was 47.2 bushels compared to a five-year average of 43.8 bushels. Harvested acres as a percentage of planted acres were 85.6 percent, compared to a five-year average of 81.1 percent.

Winter wheat production for 2008/09 was 1.87 billion bushels compared to a five-year average of 1.54 billion bushels. In 2008/09, nearly every factor–planted acres, percent harvested acres and yield–was above average and resulted in an approximate 250-million-bushel increase in ending stocks.

For the 2009/10 marketing year, wheat planted acres are 2.3 percent below the five-year average. Fertilizer prices were at a record high during planting and less fertilizer than normal was applied. Dry conditions are expanding over the HRW wheat area. Each of these factors increases the odds that wheat stocks will decline during the 2009/10 marketing year.

If the winter wheat percentage harvested aces is the average 81.1 percent and yield is the average 43.8 bushels, 2009/10 U.S. winter wheat production will be about 1.5 billion bushels.

Spring wheat 2008/09 marketing year planted acres were 300 million above average. For the 2009/10 marketing year, spring wheat planted acres are expected to be about average.

The bottom line is that 2009 U.S. wheat production is expected to be about 2.15 billion bushels, compared to 2.5 billion bushels last year.

The five-year average total U.S. wheat use is 2.2 billion bushels. Assuming production of 2.15 billion bushels and use of 2.2 billion bushels, 2009/10 wheat ending stocks would decline from 655 million bushels to near 600 million bushels. The five-year average wheat ending stocks is 484 million bushels.

2008/09 world wheat ending stocks are projected to be 5.5 billion bushels compared to the five-year average 5.1 billion bushels. 2009/10 world wheat production is projected to be 23.5 billion bushels.

For wheat stocks to decline, both world and U.S. wheat production must be below average. The odds are about 50/50 that this will happen.

At this writing, the market is offering about $5.50 for June delivered wheat. For prices to be higher, winter wheat production will have to be less than 1.5 billion bushels, total U.S wheat production below 2.15 billion bushels and world wheat production below 23.5 billion bushels.

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