NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665

January 14, 1999

The Market Advisor: USDA Report Positive for Wheat Produced in 1999

George Flaskerud, Extension Crops Economist
NDSU Extension Service

A modest rally of wheat prices is expected in the weeks ahead to at least $3.80 in Minneapolis May and September wheat futures. Prices at this level would represent an increase of about 25 cents above December lows.

Traders were surprised by the winter wheat planted acres in the USDA reports released on Jan. 12. The winter wheat planted area for 1999 is expected to total 43.4 million acres, down 7 percent from 1998. Breaking the total down by class shows that hard red winter is down 5 percent, soft red winter is down 12 percent, white winter is down 11 percent and durum in Arizona and California is down 42 percent. The total winter wheat planted area is the smallest since 1972, according to USDA.

USDA reduced feed use and exports of wheat for the current marketing year, which will end May 31. Feed use was reduced 25 million bushels (7 percent) and exports were reduced 50 million bushels (4 percent). The result was a stocks-to-use ratio that increased from .32 in the December report to .36 in this report.

The reduction in exports is probably justified by the current pace of exports. Wheat export commitments (actual exports plus unshipped sales) to date are below the five-year average. About the only event on the horizon that could restore the higher export projection is USDA's donation program announced some months ago. That program needs further activity.

Changes made in the hard red spring balance sheet for the current marketing year were supportive to the spring wheat price. Projected ending stocks were decreased for hard red spring to 217 million bushels from the projection made a month ago of 219 million bushels. That is a small decrease, but ending stocks for the other classes were raised: 23 million bushels for hard red winter, 32 million for soft red winter, 15 million for white and 4 million for durum.

Many in the trade are also expecting that producers will plant fewer spring wheat acres in 1999, compared to a year ago. Such a reduction or the anticipation of it in the March 31 Planting Intentions Report appears necessary for a rally in the spring wheat price if growing conditions continue favorable for the winter wheat. USDA narrowed the range for the expected seasonal average farm price to $2.65-$2.75, from $2.60-$2.80 in the December report.

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Source: George Flaskerud (701) 231-7377

Editor: Dean Hulse (701) 231-6136