On Oct. 22, the USDA reported that 84 percent of the U.S. winter wheat crop had been planted. This is compared to 85 percent last year and a 5-year average of 80 percent.
By the time you read this, the 2003 winter wheat crop will nearly all be planted. Planted areas are expected to be 4 to 5 percent higher than last year.
Soil moisture is mostly adequate. However, there are substantial pockets of dry soils. Wheat for grazing and stocker prices are such that all that is needed is favorable weather for a profitable wheat and cattle program.
Cattle and wheat prices may compete for wheat acres next spring.
Late-winter and spring wheat prices will depend on Argentina's and Australia's wheat production and how other foreign wheat crop is progressing. Wheat prices between now and spring will also depend on the price of U.S. corn.
Expectations for Argentina and Australia's wheat production haven't changed in the last few weeks. Argentina's production is expected to be about 7 percent less than the five-year average of 554 million bushels and last year's 570 million bushels.
A special note about Argentina's producers is that they are now storing crops rather than selling at harvest. Storing grain is a hedge against Argentina's high inflation rate.
Since there is a shortage of storage bins, much of the grain is being stored in plastic units much like the ones in which we store silage.
Australia's wheat crop is predicted to be 478 million bushels compared to 882 million bushels last year and a five-year average of 833 million bushel. Australia's exports are projected to decline from 606 million bushel last year to 230 million this year.
The stage is set for wheat prices to remain in the $4 to $5 range until next June. If Argentina and Australia's wheat crops are lower than expected, U.S. wheat prices could exceed $5. Larger than expected production could result in $4 wheat.
The long-run wheat price trend is up. A Kansas City Board of Trade (KCBT) December wheat contract price of $4.50 will signal the beginning of a downtrend. To establish a short-run up trend, the KCBT Dec contract price has to close above $5.
Higher corn prices would help establish a wheat price up trend. Some analysts are predicting corn prices will increase after the corn harvest. U.S. production is projected to be 8.97 billion bushels compared to a five-year average of 9.56 billion.
Corn ending stocks are projected to be 764 million bushels compared to a five-year average of 1.66 billion bushels and last year's 1.6 billion. For corn prices to increase, analysts indicate that corn exports will have to be higher than expected.
The 2003 winter wheat crop is nearly planted and established. Soil moisture is better than last year and few problems are expected. The market will watch the crop but it will probably be next March before prices will react to changes in 2003 winter wheat production.
The market will watch foreign winter wheat plantings and crop conditions but again, it will probably be late winter and early spring before prices react to changes in crop conditions.
Producers who have wheat to sell or are thinking about pricing the 2003 wheat crop should consider selling the wheat in increments.
Elevators from which I have received quotes for 2003 harvested wheat appear to be offering a forward contract basis about 5 cents below average and about 15 cents below the last two year's basis. In my opinion, this is good risk management by the elevator. However; it does make buying a put option more attractive than if the basis offer was average or better.
Dr. Anderson is an economist at Oklahoma State University in Stillwater. Readers may call 405-744-6082, or e-mail [email protected].