USDA's March wheat supply and demand report and the January seeding report may be used to establish benchmarks for predicting 2003/04 marketing year wheat prices.
The supply and demand estimates combined with the increase in wheat planted acres implies lower prices for the 2003/04 wheat-marketing year.
The important benchmarks are ending stocks, exports and consumption for both the U.S. and the world (foreign). U.S. wheat ending stocks are projected to be 465 million bushels compared to a five-year average of 850 million bushels and a 10-year average of 670 million bushels.
World wheat ending stocks have averaged 7.5 billion bushels over the last five years and 6.8 billion bushels over the last 10 years. World wheat ending stocks are projected to be 6.4 billion bushels.
Thus, U.S. ending stocks are projected to be 31 percent below and world-ending stocks are projected to be 6 percent below the 10-year averages. World ending stocks have a bigger price impact than U.S. ending stocks.
The corresponding 10-year average U.S. wheat price is $3.27 and the five-year average price is $2.78. The odds are that the 2003/04 average annual wheat price will be closer to $3.27 than $2.78.
USDA's January 2003 winter wheat seedings report indicated that 2003 winter wheat planted acres are 6 percent higher than last year. Five-year average winter wheat production is 1.67 billion bushels and the 10-year average is 1.64 billion bushels.
Average five-year winter wheat planted acres are 43.2 million acres compared to an estimated 44.2 million acres for 2003. United States winter wheat production is expected to be above the five-year average of 1.67 billion bushels.
Total U.S. 2003 wheat production is expected to be about 2.3 billion bushels compared to a five-year average of 2.1 billion bushels and a 10-year average of 2.2 billion.
Total U.S. domestic and export wheat use is projected to be just below 2 billion bushels. The five-year average use is 2.3 billion. However, the five-year average includes average exports of one billion bushels per year.
There is no reason to believe that 2003/04 marketing-year wheat exports will be much higher than 2002/03 marketing year exports of 825 million bushels.
If 2003/04 marketing year exports are 900 million bushels then total U.S. wheat use is expected to be about 2.1 billion bushels. Expected production of 2.3 billion bushels and use of 2.1 billion bushels implies that 2003/04 wheat-ending stocks will increase about 200 million bushels to 645 million bushels.
This is near the 10-year average of 670 million bushels.
World 2003/04 wheat production is projected to be higher than consumption for the first time since 1999. Thus world wheat ending stocks are projected to increase next year.
There are three important benchmarks to watch; U.S. wheat production, foreign wheat production, and world wheat production. U.S. wheat production may be broken down into winter wheat and spring wheat.
U.S. winter wheat production benchmark is 1.7 billion bushels and the spring wheat production benchmark is 600 million bushels. These combine for a total U.S. wheat production benchmark of 2.3 billion bushels.
The foreign wheat production benchmark is 19.4 billion bushels and the world production benchmark is 21.7 billion bushels. As actual production deviates from these expectations, wheat price will be adjusted up or down from the expected 2003/04 marketing year average price of $3.20.
Dr. Anderson is an economist at Oklahoma State University in Stillwater. Readers may call 405-744-6082, or e-mail [email protected].