The USDA released new grain supply and demand estimates at the February Outlook Conference. There were minor changed from the USDA Long-term (10-year) estimates that had been released a few weeks earlier.
Planted acres for 2011 remained at 57 million. Expected abandonment of hard red winter wheat acres may result in harvested acres being about the same as last year. Wheat yields are expected to average 43.8 bushels per acre.
Wheat production is projected to be 2.08 billion bushels compared to 2.21 billion bushels in 2010. The five-year average is 2.16 billion bushels.
Ending stocks for 2011/12 were projected to be 663 million bushels compared to a projected 818 million bushels this year and a five-year average of 642 million bushels.
The USDA projects the 2011/12 marketing-year average price to be $7.50. The five-year average U.S. wheat price is $5.62. During the last five years, the range of the average annual prices has been from $4.26 to $6.78.
Since June 1, 2006, the daily cash price range in Oklahoma and the Texas Panhandle was between $3 on June 9, 2010 and $12.65 on March 12, 2008. The June 1, 2006 wheat price was $4.50.
For an example of wheat price volatility, consider prices during the 2010/11 wheat marketing year. The 2010/11 wheat marketing year U.S. average price is projected to be $5.70. The low price for Oklahoma and Texas was $3 at harvest and the high price was $8.96 on February 14. At this writing, cash wheat prices are about $8.10.
While the expected June, 2011 wheat price in Oklahoma and Texas is $7, with good weather and relatively high yields, wheat prices could be below $5.50. With hot, windy weather between now and harvest, wheat prices could be above $10. The weather is and always will be the key to prices.
There is concern that drought conditions exist in most of the hard red winter wheat area and the southern two-thirds of the soft red winter wheat area. Recent and projected rains may reduce drought conditions in much of the soft red winter wheat area.
The 90-day precipitation forecast is for below-average rainfall in all of the hard red winter area except Oklahoma (not including the panhandle) and the area north of the Nebraska/South Dakota east-west line. Except for the extreme southern portion of the soft red winter wheat area, average precipitation is forecast.
The 90-day temperature forecast is for above average temperatures in all the hard and soft red winter wheat areas except for an east/west band along the Kansas/Nebraska border on the south and the Nebraska/South Dakota line on the north.
Even with average rainfall, above-average temperatures and the current drought conditions make average yields unlikely.
On the negative side, world wheat production is expected to increase in 2011/12. Wheat exports are projected to be 12 percent less than last year.
Corn planted acres are projected to be between 91.5 and 92 million acres compared to 88.2 million acres last year. The 2011/12 marketing year ending stocks are projected to be 865 million bushels compared to 675 million bushels in 2010/11 and 1.7 billion bushels in 2009/10.
If wheat production is lower than currently expected, wheat prices will probably be higher than expected and vice versa. This should reduce some of the anxiety about yields.
Producers need to concentrate on producing a quality product, following a marketing plan and managing their finances. Within the next three years, having cash on hand may be the most important component of farm survival.