The market appears to be using feed grain (corn) prices to determine wheat prices. Hard red winter wheat’s nutrient feed value may be about 106% of the value of corn. Thus, when wheat prices get near or below corn prices, feed millers and feeders use more wheat in feed rations. 

The decision to switch from corn to wheat tends to be based on the corn/wheat price ratio (corn price above wheat price) and the number of months the price ratio is expected to last. The ideal cattle diet consists of at least six months of a consistent ingredient blend. Data shows that the current price relationship may last several more months. 

At this writing, the Perryton, Texas, wheat price is $6.49 compared to $7.31 for corn. Corn may be forward contracted for harvest delivery (normally starting in mid-October) for $6.01. 

The KC July wheat futures contract price is $6.52 compared to $6.64 for the KC December contract. The 14-cent increase in wheat price may be offset by a decline in the basis. 

The Perryton cash wheat basis is zero. Between now and October, the Perryton basis may decline to a minus 35 cents, which was the mid-October 2020 basis.  

See, COTTON SPIN: Tight old, new crop cotton stocks

On May 12, 2021, the USDA released supply and demand estimates (WASDE) for the 2021/22 crop marketing year. The 2021/22 U.S. wheat marketing year average price was projected to be $6.50. Oklahoma and Texas wheat prices tend to average about 15 cents below the U.S. average annual wheat price. 

In the May 2020 WASDE report, the 2020/21 wheat marketing year average price was projected to be $4.60. 2020 U.S. wheat production was projected to be 1.87 billion bushels and ending stocks were projected to be 909 million bushels.  

The May 2020 WASDE report projected world wheat production to be 28.2 billion bushels and ending stocks to be 11.4 billion bushels. The May 2021 WASDE projects 2021/22 wheat production to be 29 billion bushels and ending stocks to be 10.8 billion bushels. 

Key estimates released in the 2021/22 WASDE were U.S. wheat ending stocks of 774 million bushels compared to 872 million bushels for the 2020/21 marketing year and a 10-year average of 904 million bushels. 

For the 2021/22 wheat marketing year, the 10-year average U.S. wheat stocks-to-use ratio (ending stocks divided by total use) was projected to be 37% compared to 42% for 2020/21 and a 10-year average of 42%.  

For 2021/22, world wheat ending stocks were projected to be 10.8 billion bushels compared to 10.8 billion last year and a 5-year average of 10.5 billion bushels.  

Lower projected U.S. wheat ending stocks support higher wheat prices. During the 2014/15 wheat marketing year, U.S. wheat ending stocks were 752 million bushels, and the average annual price was $5.99. 

During the 2014/15 wheat marketing year, Oklahoma’s June 2014 average wheat price was $7.14. The average January 2015 price was $5.25, and the average May 2015 wheat price was $3.88. Wheat prices could follow the same trend as in 2014/15. 

The May 2020 WASDE projected 2020/21 marketing year U.S. corn ending stocks to be 1.3 billion bushels compared to a 10-year average of 1.8 billion bushels. The 2020/21 U.S. corn stocks-to-use ratio was projected to be 8.5 percent compared to a 10-year average of 11.8 percent. 

A projected 2021 U.S corn crop of 15 billion bushels is expected to result in corn prices declining from current levels.  

A corn harvest above 15 billion bushels would put additional downward pressure on both corn and wheat prices. If corn prices get below wheat prices, the food market has the potential to support wheat prices but not at current levels.