USDA released the 2003 planted acres estimates for wheat, corn and soybeans. Wheat planted acres were 2 percent above last year and were below prerelease trade estimates.
USDA estimates all wheat planted acres to be 61.7 million acres. Before USDA released the estimate, the average trade analysts' estimate was 63 million acres. The trade analysts' estimate range was from 61.8 million acres to 63.4 million.
USDA estimated winter wheat acres to be 44.3 million, up 6 percent from 2002. Other spring wheat acres are predicted to be 14.6 million acres, down 7 percent from 2002 and Durum wheat planted acres are predicted to be down 3 percent to 2.83 million acres.
Trade predictions of winter wheat planted acres were in line with USDA's. The surprise was that spring wheat planted acres were lower than trade expectations. Lower spring wheat planted acres are probably the result of lower wheat prices.
Corn planted acres are projected by USDA to be 79 million, essentially the same as last year. Soybean planted acres are projected to be 73.2 million, down 1 percent from 2002.
USDA's projections are expected to have little impact on nearby winter wheat prices. Winter wheat planted acres remained about the same as in USDA's January 2003 Prospective Plantings report. It was spring wheat planted acres that were below trade estimates.
Unchanged corn planted acres and slightly lower soybean acres are expected to have little impact on nearby wheat prices. However, there may be long-term positive price impacts.
In 2002, 9 billion bushels of corn were harvested from the 79.1 million planted acres, and total corn use is projected to be 9.6 billion bushels. For the 2002/03 marketing year, corn stocks are projected to decline to 999 million bushels.
The 2002/03 marketing year average corn price is projected to be $2.30 compared to $1.97 in 2001/02.
The point is that if corn production is the same as in 2002, corn stocks will continue to decline and corn prices will continue to increase. Higher corn prices will support higher wheat prices.
Current Kansas City Board of Trade July wheat contract prices imply that wheat prices in June will be below the government loan rate. Using a minus 35 cent basis, a KCBT July with price of $3.05 translates into a June price of $2.70. This is about 15 cents below the government loan rate in central Oklahoma and the Texas panhandle.
Given that winter wheat planted-acre estimates are unchanged and the winter wheat crop conditions continue to improve, winter wheat production is still predicted to be about 1.6 billion bushels. The Kansas wheat crop has shown the most improvement since the moisture received in late March.
The wheat situation in the United States and foreign countries support wheat prices below the loan rate for the 2003 U.S. wheat crop harvest period. However, it should be remembered that U.S. winter wheat production is only about 7.4 percent of the world's wheat production and total U.S. wheat production is only about 10.5 percent of the world's wheat production.
The major foreign wheat harvest begins in mid to late July. There is plenty of time for something to happen to the foreign wheat crop.
World wheat stocks are currently expected to increase during the 2003/04 wheat-marketing year. Lower than expected foreign wheat production could result in higher U.S. wheat prices.
If U.S. wheat prices decline into harvest, there may be the opportunity to purchase $3.50 KCBT December wheat call option contracts relatively cheap. Then, if wheat prices increase after the Oklahoma and Texas harvest, producers who bought cheap $3.50 KCBT December calls will have, relatively inexpensively, protected their direct government payment.
Dr. Anderson is an economist at Oklahoma State University in Stillwater. Readers may call 405-744-6082, or e-mail [email protected].