India recently tendered for 12.9 million bushels of wheat. Only two exporters offered to sell India wheat and then only offered to sell 9.2 million bushels. Normally, India would have received five or six offers. This is a sign that sellers have very little wheat to sell, or that if they have wheat, they are unwilling to sell it.
It is also a sign that the 2008 U.S. winter wheat crop is essential to meet world wheat demand. The major wheat exporters are Argentina, Australia, Canada, the European Union, and the United States. The next exportable wheat crop to be harvested is the U.S. winter wheat crop followed by Europe, Canada, Australia and Argentina.
The U.S. winter wheat harvest will start in late-May and go through July. The wheat harvest in the EU-27 will begin in mid-July with exportable wheat becoming available in mid to late-August.
Canada's winter wheat harvest starts in mid-July and the durum and spring wheat harvests start in mid-August. Canada exports mostly durum and spring wheat, which becomes available for export in late-August.
Major wheat importers are Brazil, China, N. Africa, Pakistan, SE Asia and India. India's harvest is mid-March through May. China's harvest is late-May through June.
Russia, Kazakhstan and the Ukraine's wheat harvests are in June and July. These countries' 2008 wheat exports begin in late-July.
Australia's wheat harvest is October through December and Argentina's harvest is in November and December. New crop export shipments from Australia and Argentina begin in November.
The USDA projects 2007/08 marketing-year hard red winter wheat exports to be 500 million bushels. As of December 6, 443.2 million bushels had been sold for export. To meet USDA's projection, only 67 million more bushels must be sold.
The USDA projects all classes of U.S. wheat exports to be 1.175 billion bushels. As of December 6, 1.053 billion bushels had been sold. To meet USDA's export projection, only 122 million bushels of wheat need to be sold.
At this writing, the KCBT March wheat contract price is $9.95 and the July wheat contract price is $8.16. There is a $1.79 spread between the March and July wheat contract prices.
Oklahoma and Texas Panhandle cash wheat prices are around $9.30. Wheat may be forward contracted for harvest delivery for about $7.61. There is a $1.69 spread between current cash prices and forward contract price offers.
Wheat prices are volatile and will remain volatile between now and July. During the winter and spring, the wheat crop is normally “killed” several times. With tight stocks each time rumors spread that yields have been reduced, wheat prices will increase. After the rumor dies, wheat prices will decline.
My projected June Oklahoma and Texas Panhandle wheat price is about $7. Above-average U.S. winter wheat production (1.5 billion bushels) may result in $6. Below-average U.S. winter wheat production may result in wheat prices closer to $8.
Some analysts project foreign producers will increase wheat planted acres between six and eight percent. If foreign yields are above average, wheat prices should remain relatively high through June and into July and then start a downtrend when the foreign wheat hits the export market in late-August.
Based on the stocks-to-use ratio, U.S. and world wheat stocks are at or near record lows. The odds are that stocks will increase during the 2008/09 marketing year. The odds also indicate that wheat prices will remain above $5 until at least June 2009.