Since early August, wheat prices have increased $1.54, corn $1.19, milo $2.15 and soybeans $3.11. Unless we get too excited about the price increases, cash wheat prices are still 20 cents below the 10-year average price, and corn prices are 46 cents below average.
Some prices to get excited about are soybean prices, which are 65 cents above average and milo prices, which are $2.15 above the 10-year average price. Milo prices are normally 25 cents below corn prices but are currently $1.50 above corn prices.
One reason for higher soybean prices is strong Chinese demand. Another reason is that Brazil is essentially out of exportable soybeans. (A Brazilian company imported a cargo of U.S. soybeans.) Brazil’s export soybean price is reported to be $1.13 cents per bushel ($41.10/MT) higher than the U.S. soybean export price. Around the first of the year, Brazil’s soybean prices are projected to be lower than U.S. soybean prices.
Chinese demand is also one reason for higher milo prices. China does not have an import tax on U.S. milo, but does have a tax on U.S. corn. The tax makes the net milo price less than the corn price, and some Chinese buyers are importing milo instead of corn.
The November WASDE (World Agricultural Supply and Demand Estimates) report projected that 2020/21 wheat marketing year (June 2020 through May 2021) world wheat production will be a record 28.4 billion bushels. The world’s five-year average production is 27.6 billion bushels.
World wheat production is in excess of demand and world wheat ending stocks are projected to increase to a record 11.8 billion bushels compared to a five-year average of 10.1 billion bushels.
With excess world wheat supplies, well below average prices could be expected as was the case in July and August with below $4 wheat prices in early August.
At this writing, the Medford Oklahoma wheat price is $5.20, and the 10-year average Oklahoma price is $5.45. In early August, the Oklahoma wheat price was $3.81, which is $1.64 below the 10-year average price. It appears that relatively tight hard wheat (hard red winter and hard red spring wheat) stocks trump the world’s wheat stocks.
The wheat price increase was caused by strong demand for flour milling bread wheat and declining hard red wheat stocks. While world wheat ending stocks are projected to increase to a record 11.8 billion bushels, world hard wheat ending stocks are projected to be 1.562 billion bushels compared to a 10-year average of 1.661 billion bushels.
United States hard red winter wheat ending stocks are projected to be 338 million bushels compared to a 10-year average of 422 million.
Another factor causing higher wheat prices is relatively poor 2021 winter wheat growing conditions. Dry conditions in Russia may reduce winter wheat acres by nine percent. Dry conditions in Oklahoma, Kansas, and the Texas panhandle increases the odds of lower 2021 wheat production.
A reduction in 2020 U.S. corn production and projected lower corn ending stocks resulted in higher corn prices. The higher corn prices may have supported higher wheat prices.
Relatively strong Chinese demand for U.S. corn also supported higher corn prices. There are indications that corn prices may be near the top.
At this writing, stored wheat may be sold for about $5.20, and 2021 harvested wheat may be forward contracted for $5.50 in Northern Oklahoma and $5.40 in the Texas panhandle and Southern Oklahoma. Corn may be sold for $4.50 in Perryton, Texas and $4 in Medford Oklahoma. Milo may be sold for $5.24 in Perryton and $5.60 in Medford.
It may be time to take advantage of grain prices while they are looking up.