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Corn+Soybean Digest

Will Wheat Prices Turn Around?

Winter can’t end soon enough for many, thanks to harsh weather. And the approaching spring means winter wheat will begin its growth toward maturity. It also means growers will be watching closely for a chance to get their crop marketed at the best possible price.

Melvin Brees, University of Missouri Food and Agricultural Policy Research Institute agricultural economist, says producers should closely monitor market conditions and reports, like last week’s USDA World Agricultural Supply and Demand Estimates (WASDE) report. It offered somewhat better news for corn and soybeans than last month’s bearish surprises, while wheat price projections remain about the same.

“Wheat ending stocks projections continue to grow,” says Brees. “The only change to domestic supply/use estimates was an increase in wheat exports of 5 million bushels. This was based on expectations of imports of European and South American wheat in the southeastern U.S. feed market.

“This increased expected 2009-2010 wheat ending stocks from 976 million bushels to 981 million bushels. Few changes were made to world supply/use estimates and expected world ending stocks are nearly unchanged at 195.86 million metric tons (mmt). The USDA forecast wheat price range was narrowed by 5¢ and is now expected to range from $4.75 to $4.95/bu.”

USDA says 2009-2010 corn estimated ending stocks were lowered from 1.764 billion bushels to 1.719 billion bushels. “This was within the range of pre-report trade estimates, but somewhat below the average trade expectation of 1.748 billion bushels,” says Brees. “Projected ethanol use was increased 100 million bushels. Corn sweetener use was reduced 5 million bushels and exports were lowered 50 million bushels. These use changes accounted for the 45 million bushels reduction in domestic ending stocks.

“Argentine forecast corn production was increased 2.2 mmt, but this was more than offset by production reductions in Europe and increased global use. Estimated world corn ending stocks declined from last month’s 136.19 mmt to 134.04 mmt. This carryover projection is also down from the 2008-2009 world corn ending stocks of 145.88 mmt. The USDA forecast 2009-2010 price range was narrowed by 5¢ and now expected to range from $3.45 to $3.95/bu.”

Brees says strong soybean demand continues to chew into the record crop. “Expected domestic crush was increased 10 million bushels and the export estimate was increased 25 million bushels,” he says. “These changes reduced expected 2009-2010 U.S. soybean ending stocks to 210 million bushels. This was somewhat below the average pre-report trade expected carryover of 219 million bushels.

“Good crops are on the way in South America. Expected Brazilian production was increased from 65 mmt to 66 mmt, but Argentine production was left unchanged at 53 mmt. However, expected world soybean carryover is slightly lower than the January estimate of 59.80 mmt at 59.73. USDA’s forecasted price range is lowered by 20¢ and now forecast to range from $8.70 to $10.20/bu.

“Market fundamental factors remain negative for prices. Wheat ending stocks remain burdensome. Although soybean carryover is tightening, corn carryover remains more than adequate. The Argentine corn crop is expected to be larger and large South American soybean production will lead to increased world soybean supplies.

Brees says that with reduced winter wheat seedings and expiring CRP contracts, more acres will be available for 2010 U.S. corn and soybean production. “Economic conditions remain uncertain, weakness in oil prices and strength in the dollar continue to be negative to grain prices as well,” he says. “These and other factors will likely continue to contribute to market uncertainty and price volatility.”

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