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Wheat supply and demand – price – situation

World wheat production for the 2009/2010 wheat marketing year (June through May) is in storage. There may be minor changes in estimated supply, but for all practical purposes, the 2009/2010 marketing-year world wheat supply is known.

World 2009/2010 wheat production was 24.8 billion bushels and U.S. production was 2.22 billion bushels.

Total U.S. wheat 2009/2010 ending stocks (May 31 stocks) are projected to be around 900 million bushels. Ending stocks for 2008/2009 were 657 million bushels, 306 million for 2007/2009 and the five-year average was 578 million bushels.

Before combines start rolling in 2010, about 42 percent of an average U.S. wheat crop will be in storage. The amount of wheat in storage that is above the five-year average (578 million bushels) amounts to about 15 percent of average annual U.S. wheat production.

World 2009/2010 wheat ending stocks are projected to be about 7 billion bushels. Compare this to last year’s 6 billion, 4.4 billion for the 2007/2008 marketing year and a five-year average of 5.5 billion bushels.

World 2009/2010 marketing year wheat ending stocks are projected to be 30 percent of an average wheat crop. World wheat ending stocks are projected to be 1.5 billion bushels above the five-year average, which is about 6 percent of the world’s five-year average annual production.

Domestic U.S. wheat uses consist of food, seed and feed. Food use is relatively stable at about 934 million bushels. Since the 1996/1997 wheat marketing year, U.S. wheat use for food has ranged from 910 million bushels (2004/2005) to 948 million bushels (2007/2008).

Wheat use for seed averages about 80 million bushels. The five-year average is 80.2 million bushels and the 10-year average is 80.6 million bushels.

Wheat used for feed is more variable, with the range during the last three years from 16 million bushels to 258 million bushels.

Total U.S. domestic wheat use has a five-year average of 1.16 billion bushels and a 10-year average of 1.18. The range of domestic use is from 1.05 billion bushels in 2007/2008 to 1.33 billion bushels in 2000/2001.

During the last 10 years, U.S wheat exports have ranged from 850 million bushels in 2002/2003 to 1.26 billion bushels in 2007/2008. Total U.S. wheat use has ranged from 1.97 billion bushels in 2002/2003 to 2.4 billion bushels in 2000/2001. Wheat use has averaged about 2.28 billion bushels per year.

During the last five years, world wheat consumption has averaged 23.1 billion bushels. For the 2009/2010 wheat marketing year, world wheat consumption is projected to be 23.8 billion bushels.

For the 2009/2010 wheat marketing year, U.S. wheat production (2.22 billion bushels) and wheat imports (110 million bushels) are projected to be about 250 million bushels more than U.S. wheat use (2.08 million bushels).

World wheat production (24.76 billion bushels) is projected to be about 1 billion bushels more than world wheat consumption. The result is a billion bushels increase in stocks.

For U.S. wheat ending stocks to remain at the current 900 million bushels level, 2010 U.S. wheat production needs to be about 100 million bushels less than U.S. wheat use (domestic plus exports). Using 2009/2010 use (2.08 billion bushels), 2010 U.S. wheat production must be 1.98 billion bushels.

For U.S. wheat ending stocks to decline to the five-year average of 578 million bushels, 2010 wheat production must be about 1.66 billion bushels. Only one time (2002’s 1.60 billion bushels) since 1972, has U.S. wheat production been below 1.66 billion bushels. Since 1975, annual production was below 1.9 billion bushels only four times.

Wheat use is relatively stable. Thus, additional wheat use can’t be expected to reduce wheat stocks. Stocks will only be reduced by lower production.

Without a disastrous 2010 wheat crop, wheat prices are unlikely to be much over $5. The best guess is that June 2010 wheat prices in Oklahoma and Texas will be in the $3.75 to $5.50 range, with the most likely price about $4.60.

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