USDA offered a friendly to bullish wheat supply and demand report June 12 as ending stocks for both old and new crop wheat are lower than the average trade guess. Projections for 2011/12 marketing year which ended on May 31 for wheat are for ending stocks of 728 million bushels, 40 million bushels lower than last month and 29 million bushels lower than the average trade guess.

A 10 million bushel increase in food use and a 30 million bushel increase in exports accounted for the change from May.

The stocks to use ratio was lowered from 34.7 percent to 32.3 percent. The estimated season average price was unchanged at $7.25 a bushel.

World ending stocks are projected at 7.185 billion bushels, down 54 million bushels from May.

USDA new crop projections estimate ending stocks at 694 million bushels compared to the average pre-report guess of 728 million bushels and May’s projection of 735 million bushels. Production was lowered 11 million bushels on a 0.3 bushel decline in yield.

Feed and residual use is projected 10 million bushels less than in May.

Stocks to use are expected to drop to 29.1 percent with a season average price of $5.60 to $6.80 a bushel.

Global stocks are expected to decrease 87 million bushels to 6.825 billion bushels.

Despite a friendly report, wheat prices have followed corn as July wheat closed at $6.16, down 14 ½ cents. Technical analysis shows a sell bias with support at $6.02 with resistance at $6.42 a bushel.

In my weekly comments, I am currently priced at 70 percent on the current crop and would sell the remainder as it is harvested. If storage is an option, I would consider looking at a December Put option to set a futures floor.

Over the past 31 years the average difference between the June projection for U.S. ending stocks and the final estimate has been 3.7 million bushels with 17 years below the final estimate and 14 years above. These numbers can and will change, but do reflect the best information and estimates at the time of the report.

The next USDA Supply & Demand report will be released June 12, 2012.