The USDA has released its Wheat Supply and Demand Estimates for the 2018/19 marketing year (May 10 World Agricultural Supply and Demand Estimates). The projected mid-point wheat price is $5.00, which is 30 cents higher than the projected 2017/18 marketing year average price of $4.70. The projected 2018/19 marketing year average price range is between $4.50 and $5.50.

U.S. 2018 wheat production is projected to be 1.82 billion bushels, compared to 1.74 billion bushels in 2017. Hard red winter wheat production is projected to be 647 million bushels, compared to 750 million bushels in 2017, and a five-year average of 830 million bushels.

U.S. winter wheat production is projected to be 80 million bushels less than in 2017, and U.S. spring and durum wheat production is projected to be 158 million bushels more than in 2017. About 70 percent of the spring and durum wheat production is projected to be in the hard red spring wheat category.

World wheat production is projected to be 27.5 billion bushels. compared to the 27.9 billion bushel record in 2017/18. A 400 million bushel reduction in production is marginally positive for prices.

RECORD WORLD CONSUMPTION

World wheat consumption is projected to be a record 27.7 billion bushels. World ending stocks are projected to decline from the record 9.94 billion bushels to 9.71 billion. The stocks-to-use ratio (ending stocks divided by consumption) is projected to decline from 36.4 percent to 35.1 percent. The five-year average stocks-to-use ratio is 32.9 percent.

One reason for relatively low 2017/18 hard red winter wheat prices is dramatically higher 2017/18 Russian production and exports. Russian 2018 production is projected to be 2.65 billion bushels, compared to a record 3.12 billion last year.

During the last five years, Russia’s wheat exports have averaged 990 million bushels per marketing year. Its exports during the 2018/19 marketing year are projected to be 1.34 billion bushels, which is down from 1.45 billion bushels during the 2017/18 marketing year.

World wheat exports are projected to increase from 2017/18’s 6.69 billion bushels to 6.92 billion bushels during 2018/19. U.S. exports during 2018/19 are projected to be 920 million bushels, compared to 2017/18 exports of 910 million bushels, and a five-year average of 960 million bushels.

HIGHER WORLD EXPORTS

Over the last six years, world wheat exports have increased 1.8 billion bushels. Of the 1.8 billion bushel increase, 1.7 billion bushels was an increase in hard red wheat (winter and spring). During the same six years, Russian exports increased 1.04 billion bushels.

Major market factors to consider when predicting 2018/19 marketing year prices are world hard red wheat production and U.S. hard red winter wheat production, test weight, and protein.  

A shortage of milling quality wheat currently exists in the world. especially in Oklahoma, Texas, and Kansas. Therefore, 2018 harvested wheat with 58 pound plus test weight and 12 percent or better protein should bring a premium during the June and early July time period.

Current wheat prices are based on projected production in Australia (880 million bushes [mb]), Argentina (720 mb), Canada (1.10 billion bushels [bb]), Kazakhstan (510 mb), Russia (2.65 bb), the Ukraine (970 mb), and the U.S. (1.2 bb). Total production for these countries is projected to be 8.13 billion bushels.

At this writing, wheat may be forward contracted for $4.88 at Burlington, Okla., and $4.75 in Perryton Texas. Harvest prices will be above or below these prices, depending on how actual production compares to current estimates. Protein and test weight will also have a strong impact on wheat prices.