Most of the 2008 U.S. winter wheat crop is planted. Some areas have been too wet to plant, and others have been too dry. Farmers, however, trend to work miracles, and the wheat is getting planted.
If the weather cooperates to produce what producers have planted, 2008/09 marketing year wheat prices will be significantly lower than 2007/08 wheat prices.
The good news is that the market has mostly allocated Argentina and Australia's wheat crops, and that the U.S winter wheat crop is the next exportable wheat crop to be harvested. The world will need the 2008 U.S. winter wheat crop, and wheat prices should be relatively high going into July 2008.
Some analysts have estimated that wheat planted acres are between five and eight percent higher than last year. For the 2007 U.S. wheat crop, total wheat planted acres were 60.4 million acres compared to a five-year average of 59.4 million acres. A five percent increase from the 2007 planted acres would be 63.4 million acres.
United States winter wheat planted acres were 45 million acres last year. Hard red winter wheat planted acres were 32.6 million, and soft red winter wheat planted acres were 8.6 million. Both hard red and soft red winter wheat planted acres are expected to increase.
Some analysts also report that producers are applying higher fertilizer rates than last year. Producers in Oklahoma, Texas, and Kansas also appear to have delayed planting to maximize yields rather than planting earlier to produce forage for grazing.
Weather permitting, increased planted acres, fertilizer applications, and production practices designed for grain yield rather than forage could result in a higher yield per acre then was produced in 2007.
Producers may also harvest a higher percentage of the planted acres than they did last year.
What the above information implies is that the stage is set for significantly higher wheat production in 2008 compared to 2007 and significantly lower prices.
In 2007, 60.4 million acres were planted and 51 million acres were harvested (84.4 percent). Average yield in 2007 was 40.5 bushels per acre and total wheat production was 2.07 billion bushels.
If planted acres increase by five percent (63.4 million acres), harvested acres are 86 percent (54.5 million acres), and average yield is 43 bushels per acre, total production will be 2.34 billion bushels.
Foreign wheat producers are also planting more acres of wheat, applying fertilizer and using production practices that increase the odds of higher yields. Higher foreign wheat production could result in lower 2008/09 marketing year wheat export demand for U.S. wheat. United States 2008/09 marketing year export demand could decline from 1.15 billion bushels to 1.0 billion bushels.
Lower exports could result in 2008/09 marketing year total U.S. wheat use of 2.2 billion bushels compared to 2.3 billion in 2007/08.
If 2008/09 U.S. beginning stocks are 300 million bushels, production is 2.34 billion bushels, and 100 million bushels are exported, total 2008/09 wheat supply would be 2.74 billion bushels.
Subtracting use (2.2 billion) from total supply (2.74 billion) produces 2008/09 marketing year ending stocks of 540 million bushels compared to an estimated 300 million bushels this year.
The result of a 140 million bushel increase in ending stocks would be a potential $3.60 reduction in price. Between now and May 31, 2009, wheat prices could fall from the current price of $7.60 to around $4. Producers have the 2008 wheat mostly planted. All that is left is to have the weather to produce it.
Wheat prices should remain relatively high through June and maybe until the exportable foreign wheat crops are harvested in August and September of 2008. The price trend after July 2008 will depend on if the weather is conducive to producing an above average foreign wheat crop.
At this writing, wheat may be forward contracted for June delivery for about $6.26.