On Feb. 19 during the USDA Outlook forum, the USDA released U.S. supply, demand, and price estimates for the 2021/22 wheat marketing year (June 2021 through May 2022). The week prior to USDA’s release, Bloomberg published survey results from 24 market analysts showing estimates for 2021/22 U.S. wheat supply and demand.
The USDA projected that 2021/22 wheat marketing year (June 2021 through May 2022) U.S. wheat prices would average $5.50 compared to $5 during the 2021/21 wheat marketing year.
At this writing, wheat may be forward contracted for harvest delivery at $6.40 per bushel, and current market conditions indicate that 2021 harvest prices may be in the $6 range.
The average annual price is calculated by multiplying monthly average prices by the percentage of the harvest wheat sold each month. Given that 60% of Oklahoma’s hard red winter (HRW) wheat is sold during June through August time period, June through August have a larger impact on the average annual price than prices during the rest of the marketing year.
During June through August, 2020, Oklahoma’s wheat price averaged $4.22. Even though the remaining nine months price may average $5.75, $4.22 will have a larger impact on the average annual price than $5.75 ($4.22 x 0.60 + $5.75 x 0.4 = $2.53 + $2.28 = $4.81 average annual price.)
The point is that if the average wheat price is above $5.50 during June through August time period, wheat prices through the next nine months must average less than $5.50.
At the Outlook forum, the USDA estimated total U.S. planted wheat acres to be 45 million compared to the market analysts’ estimate of 45.3 million acres, and the 44.3 million acres planted for the 2020 wheat crop.
In the USDA January winter wheat seedings report, HRW wheat seedings were estimated to be 22.3 million acres, which is 4% higher than 2020’s 21.4 million acres. Soft red winter (SRW) wheat seedings were estimated to be 6.23 million acres, which is 12% higher than 2020’s 5.6 million acres.
At the Outlook Forum, all U.S. wheat production was estimated to be 1.827 billion bushels compared to the market analysts’ estimate of 1.874 billion bushels and 2020’s 1.826 billion bushels. For all classes of wheat, 2021 wheat production is projected to be about the same as in 2020.
A 4% increase in HRW wheat production due to a 4% increase in planted acres is only 26 million bushels.
Of importance to note is that 2020/21 marketing year HRW wheat ending stock are projected to be 362 million bushels compared to a five-year average of 528 million bushels. Hard red winter wheat stocks are projected to remain relatively tight during the 2021/22 wheat marketing year.
In the world market, Russian agriculture consultancy, Sovecon, estimated Russia’s 2021 wheat crop to be 2.8 billion bushels compared to 3.1 billion bushels in 2020. If this projection is correct, Russian wheat production should support 2021/22 wheat prices.
USDA’s 2021/22 corn marketing year price projection may not provide support for 2021/22 wheat prices.
At the Outlook forum, the USDA projected the 2021/22 corn average year price to be $4.20 compared to $4.30 during the 2020/21 marketing year. Corn prices will have little influence on 2021/22 wheat prices.
Current 2021 wheat production and price estimates imply that 2021/22 HRW wheat prices may peak during the June through August time period. The estimates also imply that, if Russian and other major wheat exports’ production is below average, U.S. wheat prices could reach the $7 range.