Assuming that the wheat market is an efficient market, the odds are 50 percent that wheat prices will be above $7.75 at harvest. U.S. wheat stocks are relatively tight, hard red winter wheat (HRW) stocks are expected to remain tight throughout the 2014/15 wheat marketing year and the odds of $5 wheat are nearly zero.

Since June 1, 2009, there have been about 1,490 wheat marketing days. Of these 1,490 days, wheat prices were above $7.75 per bushel 289 times (20 percent) and below $5 a bushel 306 times (21 percent). Over a five-year period, these percentages may represent the odds of $7.75 (20 percent) and $5 (21percent) wheat.

The current wheat situation is not average. HRW wheat production will be below the five-year average of 892 million bushels. Also, the odds are that HRW wheat production will be below last year’s 744 million bushels.

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SW production estimates

Oklahoma’s wheat production has been projected to be 66.5 million bushels, compared to a five-year average of 107 million bushels. The 2014 wheat production in Oklahoma is estimated to be 40.5 million bushels below average and 39 million bushels below 2013 production.

Kansas’ 2014 wheat production has been projected to be 261 million bushels compared to a five-year average of 341 million bushels. The 2012 Kansas wheat production was 319 million bushels.

Texas wheat production may be near 44.5 million bushels or 50 percent below the five-year average of 89 million bushels, compared to 62.3 million bushels in 2013 and 49.4 million bushels in 2009.

Colorado can be expected to offset some of the production decline in Kansas, Oklahoma, and Texas. Wheat planted acres in Colorado are 26 percent above last year. Colorado’s 2013 wheat production was 98 million bushels. With good growing conditions, Colorado could produce 25 million bushels more than last year, or 123 million bushels.

Contract offerings

At this writing, wheat may be forward contracted for 2014 harvest delivery between 45 and 35 cents below the KC July wheat contract price. Using a minus 40-cent basis and a KC July contract price of $8.15, wheat may be forward contracted for $7.75.

Assuming that the wheat market is an efficient market, the odds are 50/50 that wheat prices will be above or below $7.75 at harvest.

All 2013/14 U.S. wheat ending stocks are projected to be 25 percent below the five-year 776 million bushel average.  HRW wheat stocks, which are projected to be 41 percent below the five-year average, are expected to remain tight throughout the 2014/15 wheat marketing year.

For HRW wheat, the five-year average total use is 914 million bushels. Assuming that 2013/14 marketing year ending stocks are 200 million bushels (current projection is 193), that 2014 production is equal to last year’s 744 million bushels (which is not likely) and that total use is the five-year average 914 million bushels, 2014/15 HRW wheat ending stocks would be 30 million bushels. The five-year average is 325 million bushels.

HRW wheat use will not be 914 million bushels. In 2008 and 1996, HRW wheat total use was 791 and 772 million bushels, respectively. The next lower use was 748 million bushels in 1976. Using 744 million bushels production, 200 million bushels ending stocks, and 748 million bushels use, 2014/15 wheat ending stocks would be 196 million bushels.

The 2014 HRW wheat production and use are unknown. However, the odds are that 2014/15 production and use will result in 2014/15 HRW wheat ending stocks below 200 million bushels.

These projections indicate that the odds of $7.75 during the 2014/15 wheat marketing year are greater than 50 percent and the odds of $5 wheat are nearly zero. The projections also indicate that between June 1, 2014, and May 31, 2015, prices could be as low as $6 or as high as $9.