High corn prices could bump demand for wheat

USDA’s October supply and demand estimates indicate that livestock producers will look to cheaper substitutes for high-priced corn, which should result in stronger demand for wheat.

“We saw an increase of about 95 million bushels in feed use for wheat, and a 50-million bushel decline in exports, said, grain analyst Randy Martinson of Progressive Ag, speaking at a press briefing at the Minneapolis Grain Exchange. “Because of the high price for corn, we’re not going to export the wheat, we’re going to feed it.”

In its October estimate, USDA increased production of spring wheat by about 42 million bushels. Total supply has increased by about 47 million bushels, implying about 5 million bushels of imports.

Domestic use for spring wheat was increased by 45 million bushels, so stocks for spring wheat only increased by 2 million bushels. “That’s not too bad considering we saw production go up as much as we did,” Martinson said.

Martinson noted that a good quality winter wheat crop closed the gap on the premium between spring wheat and winter wheat. “Wheat was wheat this year. They didn’t need high protein to blend with the winter wheat and that pulled that premium away.”

Martinson believes that spring wheat and wheat in general “is going to have to continue to rally in the market. I was a little disappointed that we didn’t see a decrease in Russia’s production, with their drought. We need to keep an eye on Western Australia, but I’m friendly wheat. Wheat has some opportunity to forge forward.”

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World wheat production numbers “came in a little bit neutral,” Martinson said. “The demand side came in very friendly, which is helping that market.”