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WHEAT SCOOPS: What to do about volatile wheat prices

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Will prices remain high? When is the best time to sell?

Until you have wheat to sell, wheat price doesn’t matter. So, if you’re losing sleep, quit watching the market. 

Two weeks ago, I was talking about $10.40 wheat. One week ago, it was $11.10 wheat. At this writing, it’s $12.75 and no telling what the price of wheat will be when you read this article. At a meeting last week, a producer said that wheat prices were going to $14, and I said, “Probably not going to happen. . . It is possible, but not likely.” 

What does anyone know about price movements? Not much! However, the May WASDE (World Agricultural Supply and Demand Estimates), which included estimates of 2022/23 wheat marketing year production and use, was recently released. The May WASDE providee a starting point for understanding wheat prices. 

The world’s 2022/23 wheat marketing year (June 1 through May 30) production was estimated to be 28.5 billion bushels compared to 28.6 billion last year. The world’s five-year average production is 28.0 billion bushels.   

See, COTTON SPIN: 'Rough winds do shake the darling buds of May…'

World 2022/23 wheat use is estimated to be 28.9 billion bushels, which is projected to reduce world wheat ending stocks from 10.3 billion to 9.8 billion bushels. 

The 9.8 billion bushels ending stocks divided by the 28.9 billion bushels of wheat used results in a stocks-to-use ratio of 34%. A stocks-to-use ratio of 34% implies that on June 30, 2023, there will be four months of wheat in storage (12 x .34 = 4.08). The five-year average stocks-to-use ration is 35%. 

 Note the WASDE implies that there is sufficient wheat to meet demand, some classes of wheat (bread flour wheat) are tighter than others. Both Russia and Ukraine export mostly hard red winter (HRW) and hard red spring (HRS) wheat. Both Russian and Ukrainian wheat production and exports are uncertain. 

The U.S. supply of HRW and HRS wheat is also projected to be below average. Hard red winter wheat production is projected to be 590 million bushels compared to 749 million bushels last year and a five-year average of 733 million bushels.  

2021/22 wheat marketing year U.S. HRW wheat ending stocks are projected to be 365 million bushels compared to the five-year average of 524 million bushels. With below-average production and ending stocks, the U.S. total supply of HRW wheat is estimated to be 955 million bushels compared to a five-year average of 1.212 billion bushels. 

A USDA estimate for 2022 HRS wheat production is not available. However, HRS wheat planted acres are estimated to be 10.5 million acres, down from 10.9 million acres in 2021.  

The 2022/23 wheat marketing year world wheat supply (production plus beginning stocks) is projected to be 38.3 billion bushels compared to a 5-year average of 38.6 million bushels. The world’s wheat supply is projected to be 0.8% below the five-year average. 

Current wheat supply and demand estimates indicate that there is sufficient wheat to meet demand. High prices indicate that “poor” countries may have a shortage.  

There is also the risk that the war in Ukraine could cause 1.8 billion bushels, out of the world’s projected 7.0 billion bushels of wheat available for export, not to be available. Removing 26% of the world’s exportable wheat changes the entire analysis presented above.      

The bottom line is that wheat prices are expected to remain relatively high. We will know how high each day when we check the market.  

One way to sell wheat in a volatile market is to stagger the wheat in the market over time.  In Oklahoma and Texas, the best time to market wheat is often June through August. 

TAGS: Outlook
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