Wheat outlook mixed
By Cindy Snyder, Ag Weekly correspondent
Thursday, August 14, 2008 6:02 PM CDT
TWIN FALLS, Idaho - Lower-than-hoped-for yields are already showing up in the U.S. Department of Agriculture’s estimates.
Soft white wheat ending stocks were lowered from 60 million to 52 million bu. compared with a month ago in the USDA’s August grain balance sheet. That could be viewed as somewhat positive - price wise - said Paul Patterson, but that drop was more than offset by an increase in soft red wheat ending stocks. Ending stocks for soft red - a market class that often competes with soft white - grew from 141 million bu. last month to a projected 174 million bu., thanks to a large crop.
Potentially, that’s bad news for soft white wheat prices, but that doesn’t seem to be the case in the short term. Nearby wheat futures contracts closed up the limit the day after the USDA released its Aug. 12 report, and even prices at Portland were up, Patterson said. He is an extension economist for the University of Idaho at Idaho Falls.
Alan Kluis from Kluisnews/
Northland Commodities in Minneapolis said he thinks the market is in the process of putting in seasonal lows for wheat.
He expects to see prices stabilize around $8.15 per bushel for deferred contracts in Chicago and around $8.83 per bu. in Minneapolis. Chicago reflects the soft red market, while Minneapolis reflects hard red spring wheat.
“We need a good crop this year and next to keep up with demand,” he said in a conference call after the USDA released the August report.
If corn prices fall to $4.60 to $4.80 per bu., it will be difficult to keep wheat prices strong, he said. However, if corn prices stabilize around $5.20 per bu., that will help strengthen wheat, he added.
Kluis sees durum wheat prices strengthening in relation to hard red spring.
“I see durum prices operating in their own world,” he said.
However, a relatively poor-quality crop in Europe may offer some price opportunities for hard red spring growers.
“When there is a lot of poor-quality wheat in the world, you need to spike it - or blend it - with high quality wheat,” he said. “That could mean premiums for U.S. producers.”
The USDA’s August Supply and Demand Report left U.S. all wheat production nearly unchanged at 2.462 billion bu. compared with 2.461 in July. Ending stocks were raised to 574 million bu. from 537 last month.
This puts the U.S. stocks-to-use ratio at 25 percent compared to 23 percent for last month’s report and 13 percent for the 2007-08 marketing year.
This is still near the low end of the range for stocks-to-use over the past 35 years.
World wheat production for 2008/09 came in at 670.75 million metric tons, up from 664.24 mmt posted in the July report and 610.54 mmt for 2007/08.
One big question for Idaho producers is how big the Australian crop will be. That was not addressed in this report.
With the markets continuing to be very volatile, Patterson continues to recommend that growers watch the markets and look for pricing opportunities for any grain that have not yet sold.
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