The wheat market situation going into the 2016 calendar year is one of relatively high stocks, relatively low export demand, and relatively low prices. History indicates that the potential 2016 calendar year Oklahoma and Texas wheat price range is from $3.30 to $9 (Chart 1).

The major reason for relatively low prices during the 2008/09 and 2009/10 wheat marketing years was record world production and resulting relatively high stocks. Coming into the 2008/09 marketing year, the world’s five-year average production was 22.1 billion bushels, with a record of 23 billion bushels in 2004/05.

Marketing year 2008/09 wheat production was 25.1 billion bushels, and marketing year 2009/10 production was 25.2 billion bushels. Two record crops in a row resulted in world ending stocks increasing from 6.1 billion bushels in 2007/08 to 7.4 billion bushels in 2009/10.

Wheat prices fell from $8.76 in June 2008 to $3.36 in June 2010.

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During the period 2003 through 2015, U.S. wheat production has averaged 2.1 billion bushels. The range in U.S. production has been from 2.0 billion bushels in 2011 to 2.5 billion bushels in 2008/09. A review of U.S. versus world wheat production shows that world production trumps U.S. production, and that the major determinant of the U.S. wheat price is world production and stocks.

PRODUCTION AND PRICE

The wheat price went from $3.36 in June 2010 to $6.04 in early August 2010 because 2010/11 world projections declined to 23.7 billion bushels. 2010 U.S. production was projected to be an above average 2.3 billion bushels. World production trumped U.S. production and price increased.

The last time wheat prices were above $9 was July 20, 2012. World wheat production was 24.2 billion bushels and U.S. production was 2.3 billion bushels.

The world’s 2013, 2014, and 2015 wheat production set new records, at 26.3 billion bushels, 26.7 billion bushels, and 26.9 billion bushels. U.S. production was 2.1 billion, 2.0 billion, and 2.1 billion bushels. Prices have declined from above $9 to below $4 per bushel.

A difference between the 2009/2010 wheat price and current prices is the index of the U.S. dollar compared to other major currencies. In June 2010, the dollar index was about 86.5, compared to 98.5 in December 2015. The 14 percent increase is equivalent to about a 75 cent decrease in wheat prices.

Looking forward to the 2016 calendar year, wheat prices will increase if world wheat production is below world use and/or if the index of the dollar declines. A change in the dollar index could result in a price increase of 75 cents to $1.25 increase.

For wheat prices to increase $2 or more requires world wheat production to be less than 25 billion bushels.