NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
October 21, 1999
George Flaskerud, Extension Crops Economist
NDSU Extension Service
Wheat prices deteriorated considerably during September and the first half of October due to a better-than-expected winter wheat crop, mediocre export demand and weaker-than-expected feed use. The Minneapolis spring wheat December futures dropped from a Sept. 7 high of $3.58 and a Sept. 29 high of $3.45 to an Oct. 17 close of $3.26.
A recovery somewhere between $3.40 to $3.45 may be about all that can be expected by mid-November. Hopefully, a recovery in the futures price will be accompanied by an improvement in the basis of 5 to 10 cents. Generally, the basis tends to improve during October and November.
For this recovery to occur, the Minneapolis futures contract needs to continue gaining on Chicago, as it did last year. In the December contract, Minneapolis was at a 70-cent premium to Chicago on Oct. 17, up from an average of 60 cents during September. The monthly average premium strengthened last year from 63 cents in September to 70 cents in October and then to 84 cents during November. A repeat of this pattern seems likely considering the bushels and quality that have been lost due to poor harvesting conditions.
Sharply higher prices later in the marketing year does not appear likely unless the pace of exports suddenly increases, weather adversely affects the winter wheat crop or there is a change in the government program. The U.S. and world fundamentals for wheat are too negative.
USDA's October Supply and Demand Report increased projected U.S. ending stocks of all wheat by 86 million bushels, hard red winter by 63 million bushels, soft red winter by 41 million bushels and durum by 2 million bushels. USDA decreased its projections for hard red spring by 11 million bushels and white by 9 million bushels. At the world level, ending stocks are now projected to be 128.1 million metric tons, versus 124.3 million metric tons a month ago. These statistics explain why the wheat price has deteriorated while Minneapolis has gained on Chicago.
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Source: George Flaskerud (701) 231-7377
Editor: Dean Hulse (701) 231-6136