Wheat farmers around the world have already harvested about 22.3 billion bushels. World 2009-2010 marketing-year wheat production is projected to be 24.2 billion bushels.
The 2009-2010 marketing-year began with 6.2 billion bushels of wheat in storage. Thus, there is already about 28.5 billion bushels of wheat in storage to meet 2009-2010 marketing-year demand.
Another 1.9 billion bushels of wheat are projected to be harvested in the Southern Hemisphere and Canada's harvest is just winding down. Total wheat supply for the 2009-2010 marketing-year is projected to be 30.4 billion bushels.
The USDA projects 2009-2010 marketing-year world wheat use to be 23.7 billion bushels. World wheat ending stocks are projected to be 6.7 billion bushels compared to 4.5 billion bushels for the 2007-2008 marketing year.
If zero wheat is harvested in the Southern Hemisphere (Argentina and Australia), 2009-2010 world wheat ending stocks would be 4.8 billion bushels. 700 million bushels is only 2.9 percent of projected world wheat production and about 2.3 percent of projected world wheat supply.
Because of the excessive wheat supply situation, export sales for all U.S. wheat are 44 percent less than last year and hard red winter (HRW) wheat export sales are 59 percent less. The USDA projects a 6.4 percent reduction in all wheat exports and a 12.4 percent decrease in HRW exports. Export sales must increase soon or the USDA must reduce their export projection.
United States wheat producers have already harvested 2.18 billion bushels of wheat. At the beginning of harvest, there were 667 million bushels of wheat in storage. Wheat imports are projected to be 110 million bushels. The total 2009-2010 marketing-year wheat supply is projected to be 2.96 billion bushels.
Wheat use, in the U.S., is projected to be 2.22 billion bushels. Domestic use (food, seed, feed) is projected to be 1.27 billion bushels and exports are projected to be 950 million bushels.
Due to the projected second largest corn crop on record, the USDA wheat for feed estimate may be high. USDA's export estimate has already been discussed.
United States wheat ending stocks are projected to be 743 million bushels compared to 667 million bushels in 2008-2009 and 306 million bushels in 2007-2008. Average U.S. ending wheat stocks is 508 million bushels.
For wheat prices to be in the $5 range, world wheat ending stocks need to be less than 5.5 billion bushels and U.S. wheat ending stocks need to be less than 500 million bushels. World stocks need to be reduced over 1.2 billion bushels and U.S. stocks need to be reduced over 273 million bushels to reach these levels.
If the 2010-2011 marketing-year world wheat production is above 21.8 billion bushel, the excess wheat supply will not change. Production above 21.8 billion bushels is expected to result in higher ending stocks. World wheat production has not been less than 21.8 billion bushels since the 2003-2004 wheat marketing-year.
For U.S. wheat ending stocks to decline, 2010 wheat production must be less than 2.1 billion bushels. Wheat production in 2007 was 2.05 billion bushels.
High stocks and relatively low prices should result in less planted acres than last year. Some producers may reduce fertilizer and other inputs (which I think is a mistake). Lower planted acres and limited inputs will increase the odds of lower production. Weather will be the major determinant for wheat production.
Excess wheat stocks are expected to keep wheat prices below $5. The KCBT July 2010 wheat contract price is about $5.40. Using a minus 80-cent basis, the market is projecting a $4.60 June 2010 wheat price.
Given the excess stocks, producers may be prudent to make plans using $4.50 or less for 2010 wheat.