U.S. wheat supply-demand and price forecasts for MY2013/14 are available on the KSU AgManager.info website (http://www.agmanager.info/). These forecasts were provided to the public at the Cover Your Acres Conference in Oberlin, Kansas, January 15-16.
Projections for U.S. wheat supply-demand balances and prices for the coming year from that meeting are provided below:
The take away points of this U.S. wheat supply-demand balance and price forecast for MY 2013/14 is that there is likely a 1/4 (25%) chance for a short crop scenario for U.S. wheat, with resulting higher prices. With planted acreage for all wheat at 56.2 million acres (41.8 million acres of winter wheat from the 1/11/2012 USDA Winter Wheat Seedings report plus assumptions of the same 2012 totals for other spring and durum wheat in 2013), and an assumption of lower harvested to planted acreage due to the pervasive poor emergence and overwintering conditions in the central and southern plains hard red winter wheat areas, the impact of a low U.S. wheat yields (say 38.6 bu/ac as in 2006) with reasonable assumptions of usage, leads to sharply lower U.S. ending stocks (492 moln bu) and ending stocks-to-use (23.1% S/U) compared to USDA projections for MY 2012/13 (i.e., 716 mb and 29.5% S/U). The “wildcard” in this scenario is U.S. wheat exports.
IF crop shortfalls actually do occur to a significant degree in major export competitors such as Australia, Argentina, and the Black Sea region (all of which are currently having reports of weather induced crop production risk) – resulting in 200 mb more U.S. wheat exports in the Low Yield scenario, THEN U.S. wheat exports rise to 1.200 billion bushels, usage moves to 2.325 bb, ending stocks drop to 292 mb, and U.S. wheat ending stocks-to-use would fall to 12.5%, essentially equal to the historic record low of 13.1% in the landmark U.S. and World short crop year of MY 2007/08. Under this scenario wheat prices would likely move to $10.00 or higher.
If these respective short crop marketing year scenarios should NOT come to fruition, with either trend (45.2 bu/ac) or above trendline (46.3 bu/ac, equaling the historic high), then production would be at 2.1-2.3 billion bushels or above, with prices falling to the range of $7.65-$8.50 per bushel.
One final thought has to do with what would occur to the relative prices of wheat and corn should a short crop develop for U.S. and world wheat in combination for a more normal trendline U.S. corn crop of 14.0 billion bushels or more. In this case, it is relatively easy to expect that U.S. corn prices could move lower to the $4.00-$5.00 range while wheat prices would independently move higher to $8.75-$9.25. If, on the other hand, the opposite situation occurred where a short U.S. corn crop occurred in combination with a trendline yield or greater wheat crop in 2013, it is likely that wheat prices would move higher to follow the trend of corn in order to reflect the relative livestock feed value for the two crops.
Materials and Comments prepared by Daniel O’Brien, Ph.D., Extension Agricultural Economist, Kansas State University