Two reasons for $5 wheat during the 2018 Oklahoma and Texas harvests were an acute shortage of milling quality wheat and 2018 harvested wheat with above 12 percent protein and 60 pound test weight.
Two reasons to predict $5.75, or higher, 2019/20 prices are an expected acute shortage of milling quality wheat and harvested wheat above 12 percent protein and 60 pound-plus test weight.
A documented fact is that one reason Oklahoma’s 2017/18 wheat marketing year prices averaged $3.98 was because the average protein for the 2016 crop was 11 percent and the average protein for the 2017 crop was 10.9 percent. The majority of the world’s 2017/18 hard wheat production also contained relatively low protein.
The world’s protein shortage is expected to continue into the 2019/20 wheat marketing year. U.S. 2018 hard red winter (HRW) wheat production is projected to be 661 million bushels, while use is projected to be 839 million bushels, 178 million bushels more than production.
U.S. hard red spring (HRS) wheat production is projected to be 583 million bushels, and use is projected to be 587 million bushels. With more hard red wheat being used than produced, 2018/19 marketing year ending stocks are expected to again contain relatively low protein.
WHEN’S THE INCREASE?
The same scenario can be presented for foreign wheat. The market entered the 2017/18 marketing year with relatively low protein. Foreign 2018/19 consumption is projected to be 1.6 billion bushels greater than 2018/19 foreign production.
Now that it has been established that all the relatively high protein wheat harvested in 2018 will be used, June 2019 wheat prices should be $5.75 or higher. The question becomes: When will wheat prices increase?
Wheat prices should increase as soon as export demand increases. The USDA projects 2018/19 marketing year U.S. HRW exports to be 375 million bushels, the same as last year. U.S. HRS wheat exports are projected to 295 million bushels, which compares to 229 million bushels last year. At this writing, 2018/19 marketing year U.S. HRW wheat export sales are 68.3 million bushels (38 percent) less than last year’s exports.
MORE EXPORT DEMAND
Export demand for U.S. HRW is expected to increase when the Black Sea region (Russia, and the Ukraine) has a limited amount of wheat to sell. Russia (27 percent), the Ukraine (13 percent), and Kazakhstan (7 percent) are projected to sell 46 percent of the world’s 2018/19 marketing year hard wheat sales. At this time, the Black Sea Region is the major determinant of world hard wheat export prices.
Because of lower production and quality of 2018 Russian and Ukrainian wheat, 2018/19 marketing year Black Sea wheat exports are projected to be 283 million bushels less than during the 2017/18 marketing year.
World wheat exports are projected to be 6.7 billion bushels, which is the same as last year.
Argentina’s wheat production (harvest starts in November) is projected to be 716 million bushels, compared to 661 million bushels last year. Argentine exports are projected to be 522 million bushels, 81 million bushels more than for 2017/18.
Australia’s wheat production (harvest starts mid-October) is projected to be 48 million bushels lower than 2017/18, and exports are projected to decline by 19 million bushels.
With Russia, the Ukraine, and Kazakhstan’s 283 million bushel reduction, Argentina’s 81 million bushel increase, and Australia’s 19 million bushel reduction, 221 million bushels of hard red wheat will be available for the U.S. or Canada to pick up.
U.S. hard red wheat export demand should increase starting as soon as early November, but most likely after the first of the year. With increased export demand should come higher prices.