This year has the potential to be the best grain price year since the 2014/15 marketing year for wheat and the 2013/14 marketing year for corn. Wheat may be forward contracted for 2021 harvest delivery for $5.89 in Medford, Okla., and $5.73 in Perryton, Texas. Corn may be forward contracted for 2021 harvest delivery for $4.22 in Medford and $4.48 in Perryton.
In early January 2020, the 2020 Medford harvest forward contract prices were $4.55 for wheat and $3.71 for corn. The wheat forward contract price is $1.34 higher, and the corn forward contract price is 51 cents higher.
Wheat prices may be higher because of relatively low hard (bread flour) wheat stocks and below-average 2021 winter wheat crop conditions.
World wheat ending stocks are projected to be a record 11.6 billion bushels compared to a five-year average of 10.1 billion bushels. The world’s wheat stocks-to-use ratio is projected to be 42%, which is the highest in over 60 years.
Comparatively, world hard wheat ending stocks are projected to be 1.6 billion bushels compared to a five-year average of 1.7 billion bushels, and the hard wheat stocks-to-use ratio is projected to be 18%, which is the lowest since the 2007/08 marketing year.
The 2020/21 U.S. hard red winter wheat ending stocks are projected to be 348 million bushels compared to 506 million for 2019/20 and a five-year average of 528 million bushels.
Russian wheat news may also have impacted wheat prices. Russian President Putin declared a “war on food prices” resulting in an 82-cent-per-bushel tax on exported wheat. Analysts have indicated that this may have resulted in a 40-cent, or higher, increase in U.S. wheat prices.
The 2021 Russian wheat crop was planted under poor conditions, and reports indicate that the Russian wheat crop has the highest percentage of poor to very poor ratings since 2014. The USDA winter wheat crop condition report also indicated the U.S. winter wheat crop has a higher percentage of poor to very poor wheat than normal.
Ukraine’s 2021 winter wheat crop plantings are reported to be 9.3% lower than for the 2020 crop, which also supports higher wheat prices.
Relatively higher corn prices are the result of below-average stocks and relatively good demand. World 2020/21 corn ending stocks are projected to be 11.4 billion bushels compared to a five-year average of 12.8 billion bushels. U.S. corn ending stocks are projected to 1.7 billion bushels compared to a five-year average of 2.1 billion bushels.
World and U.S. corn stocks have been declining even though world corn production is projected to be a record 45 billion bushels. The five-year average corn production is 43 billion bushels.
During the 2020/21 corn marketing year, China is projected to use 11.2 billion bushels of corn (25% of world corn production). As China's hog production increases, corn demand is projected to remain strong.
Grain prices are the highest in several years, and the stage may be set for even higher prices. Below average winter wheat crop conditions increase the odds that yields will be relatively low, which supports higher prices. But, it is common knowledge that, for wheat, weather during the March through May period (April through June in Russia/Ukraine) determines wheat yields.
Current price offers may be locked in by forward contracting for harvest delivery. Minimum prices may also be established by forward contracting and then buying call options contracts or by buying put option contracts. Using a minus 20 cent basis, a $5 minimum price may be established for about 35 cents.
The 2021/22 wheat and corn marketing year, weather permitting, could be a relatively good year.