What is in this article?:
- Ending stocks do not explain wheat prices
- Global production estimates lowered
• Wheat prices gained nearly $1 on rumors and best guesses.
• Wheat marketing-year ending stocks are projected to be above five-year averages.
• Consider selling one-third at harvest, one-third in September/October and the remaining third in November/December.
Both U.S. and world 2012/13 wheat marketing-year ending stocks are projected to be above five-year averages.
Even with above average projected ending stocks, wheat prices gained nearly $1 on rumors and best guesses.
United States 2012/13 wheat ending stocks are projected to be 735 million bushels compared to 768 million bushels in 2011/12 and a five-year average of 714 million bushels. World 2012/13 wheat ending stocks are projected to be 6.9 billion bushels compared to a five-year average of 6.5 billion bushels.
With higher wheat production and consumption, the ending stocks projection doesn’t provide as strong a price indicator as it did 10 or even five years ago. A better price indicator is the stocks-to-use ratio, which is ending stocks divided by use and converted to a percentage.
The U.S. 2012/13 wheat marketing-year stocks-to-use ratio is projected to be 30.7 percent compared to a five-year average of 32.2 percent. The world 2012/13 wheat marketing year stocks-to-use ratio is projected to be 27.4 percent compared to a five-year average of 27.1 percent. The U.S. wheat stocks-to-use is below the five-year average and the world stocks-to-use ratio is near the five-year average.
The stocks-to-use ratios indicate that U.S. and world stocks are sufficiently tight that any decline in 2012/13 wheat production may have a significant price impact. The recent four-day 90 cent wheat price rally supports this statement.