Wheat prices had increased 90 cents per bushel. It rained in Australia and the U.S. hard red winter wheat belt. Wheat prices fell 30 cents per bushel. And the odds of $5 wheat by Oct. 16 went from about 20 percent to “slim to none.” The market will have to look for other reasons for higher prices.

Positive wheat price factors include tight world and foreign wheat stocks, potentially lower wheat export competition, relatively strong U.S. wheat exports and relatively strong corn prices. Wheat prices between now and next June will depend mostly on the strength of U.S. wheat and corn exports.

World 2003/04 wheat ending stocks are projected to be 4.8 billion bushels compared to 7.6 billion in 1999 and a five-year average of 7.2 billion bushels. This will be the fifth year in a row with level or declining world wheat stocks.

Foreign 2003/04 wheat ending stocks are projected to be 4.2 billion bushels compared to a five-year average of 6.4 billion bushels. China holds 1.6 billion bushels of projected foreign wheat ending stocks.

Less Chinese wheat

Chinese producers continue to reduce wheat planted acres and wheat production. Chinese wheat production has declined from 4.2 billion bushels in 1999 to a projected 3.2 billion bushels in 2003. China's wheat ending stocks have declined from 3.8 billion bushels in 1999 and China is expected to start importing wheat within the next two years.

In June, the USDA projected U.S.-2003/04 marketing year (June 1 through May 31) exports to be 950 million bushels. In the August report, the USDA projected U.S.-2003/04 wheat exports to be 1,050 million bushels.

To date, total U.S. wheat exports are 27 percent and hard red winter wheat exports are 51 percent above last year's exports. Continued strong U.S. wheat exports will partially depend on Argentina and Australia's wheat production.

Australia's 2002/03 marketing year wheat production was 345 million bushels compared to a five-year average of 753 million bushels. After recent rain over Australia's major wheat production areas, the Australian Wheat Board raised Australia's wheat production estimate to about 845 million bushels. Australia is expected to aggressively export increases in wheat production.

Corn prices up

Within the last few weeks, U.S. corn prices have increased about 30 cents per bushel. Corn production is projected to be nearly 10.1 billion bushels. Corn ending stocks are projected to be 1.2 billion bushels compared to a 5-year average of 1.6 billion bushels. Corn prices need to continue to increase to support higher wheat prices.

United States wheat ending stocks are projected to be 643 million bushels compared to a five-year average of 810 million bushels and 492 million bushels last year.

Note that with 492 million bushels of wheat ending stocks, in the 2002/03 marketing year U.S. wheat prices averaged $3.56 per bushel. During the 2001/02 year, U.S. wheat ending stocks were 777 and the U.S. average annual price was $2.78. This implies that unless ending stocks decline, U.S. wheat prices should average about $3.30 per bushel.

Key price levels on the Kansas City Board of Trade December contract are $3.60 and $3.85. Two consecutive closes below $3.60 imply that the next KCBT December target is $3.35. Two consecutive closes above $3.85 imply that the next KCBT December target is $4.10.

Risk to own wheat includes about 25-cent lower prices plus about 3.5 cents per month storage and interest. Potential price increases between now and Dec. 1 is about 50 cents. Most prudent producers have a plan that includes dates or price targets that dictate when to sell their wheat. It is normally a mistake to make major changes in a marketing plan unless there are major changes in the market conditions.