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

March 11, 1999

The Market Advisor: What to Look for in the Wheat Market

George Flaskerud, Extension Crops Economist
NDSU Extension Service

Winter wheat growing conditions, planting intentions and exports will drive wheat prices in coming weeks. Longer term, world production is the key factor.

The futures market has apparently decided that the wheat fundamentals suggest a higher price is warranted. Minneapolis September spring wheat futures bottomed at $3.34 on Feb. 25, tested a trend line at $3.58 on March 8 and closed at $3.49 on March 9. The charts suggest higher prices are possible. Resistance levels to carefully watch include the $3.74 high on Jan. 12 and the $3.87 contract high on Oct. 18. As prices approach these levels, forward sales should be considered.

The winter wheat crop is in generally good shape. State reports indicate that the hard red winter wheat crop in Kansas and Oklahoma is in mostly good to excellent condition. The crop in Texas is rated mostly fair, a mid-level rating. Whether the record hard red winter wheat yields of the last two years can be repeated depends on the critical development period which is still ahead.

Attention will be focused on the March 31 Planting Intentions Report to see what happens to spring wheat and durum acres. Risk factors such as attitude toward risk and financial condition will be especially important in determining acres in eastern North Dakota. Durum comes out ahead of spring wheat for those who want to minimize risk through Crop Revenue Coverage Insurance. For those who believe average or better yields are attainable, spring wheat has more profit potential.

Hard red spring wheat surpasses all classes of wheat in the area of exports. Export commitments (actual exports plus unshipped sales) are way ahead of a year ago. They are slightly ahead for hard red winter, about even for white, down slightly for durum and way down for soft red winter. For all wheat, commitments are down from last year and from the five-year average. Looking ahead, USDA economist Peter Riley recently projected that exports would be up from 1.025 million bushels in the current marketing year to 1.150 million bushels for 1999-00.

World wheat production is generally expected to be down considerably from the 1997-98 peak of 609 million metric tons (mmt) and last year's 586 mmt. Kansas State University economist Bill Tierney recently projected 580 mmt for 1999-00, and the International Grains Council recently projected 571 mmt. According to Tierney, 1999-00 world ending stocks of wheat could drop to 16.5 percent of total use, which is lower than any level that I could find looking back to 1960-61. Ending stocks were 19.2 percent of total use in 1995-96 and 19.3 percent in 1996-97, periods of high prices for wheat.

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Source: George Flaskerud (701) 231-7377

Editor: Dean Hulse (701) 231-6136