What is in this article?:
• Prices appear stable as the price ratio of corn and wheat is returning to a traditional relationship.
• Fundamentals are not bullish going into planting for 2012.
• However, concern for global exports and moisture for winter seeding in the U.S. are supporting prices.
Ending stocks will fall
Ending stocks will fall to make up for the shortage to 177 million tons.
As long as corn and soybean prices remain strong, there will be concern with wheat production so prices should remain strong for winter planting to keep acreage in wheat and alleviate the threat of greater shortage of wheat globally down the road.
Total U.S. disappearance of wheat in 2011/12 fell to 2.23 million bushels in response to smaller crop and drop in exports with increased production in exporting nations other than the U.S.
Total domestic food use rose to 926 million bushels, an increase of 1 percent. For 2012/13, the trend is forecast to reverse. Food use is expected to grow to 950 million bushels representing 76 percent of domestic use and 39 percent of total use.
Feed use is forecast to jump to 220 million bushels, having substituted for corn in rations. This figure could grow more with higher corn prices.
Exports will increase with a weaker dollar and a 7 percent drop in exporter nation production.
The U.S. is expected to export 1.2 billion bushels.
Source: FAS USDA Grain: World Markets and Trade, Circular Series, September 2012
Local mills in Georgia and neighboring states are the main source of mill demand for Georgia wheat. Mill demand does not fluctuate as much as exports, but the domestic mill use is also limited.
Thus, exports can have a large influence on year-to-year price of soft red winter wheat. When exports are down, basis widens and prices fall in Georgia.
Prices at planting will be much better for growers than the last couple years. Basis has improved bid at 50-60 cents under under Chicago July futures for 2013.
Contract prices will likely be around $8 per bushel.
Corn and soybean prices probably peaked in early September, unless harvest surprises analysts with bigger drop in yields. These will likely be moderated with more acres planted than previously reported.
Fundamental supply and demand estimates indicate supplies should be adequate for the U.S. Exports will be key.