July 11, 2002

Market Advisor: Wheat and Soybean Stocks Continue to Tighten

By George Flaskerud, Crops Economist
NDSU Extension Service

Projected ending stocks for 2002-03 were reduced for both wheat and soybeans in the Supply and Demand Report released by USDA July 11. Stocks were a little below the average of trade expectations but well within their range, so expectations may have been largely built into prices. Futures prices for new crop spring wheat and soybeans have gained about 50 cents in the last month. The tighter stocks, however, do mean that prices of these and related crops will continue to be especially sensitive to crop growing conditions. Minimum price contracts or options should be strongly considered in preharvest marketing strategies.

Ending stocks of all wheat were projected to be down 33 percent from a year ago and down 6 percent from USDA’s projection last month. The biggest year-to-year reduction in stocks came from hard red winter at 40 percent which was closely followed by hard red spring at 37 percent. Durum ending stocks were projected to be about the same as a year ago.

Reduced yields more than offset the increase in planted acres of winter wheat and spring wheat. The winter wheat yield was projected to be 39.6 bushels per acre versus 41 last month and 43.5 last year. The spring wheat yield was pegged at 32 bushels per acre versus 35.2 last year. In North Dakota, spring wheat was at 31 bushels per acre versus 34 last year. The U.S. durum yield was projected to be 31.3 versus 30 bushels per acre last year, although in North Dakota it was the same at 26 bushels per acre.

Farmers planted 877,000 more spring wheat acres than March intentions and 334,000 more than a year ago, according to a June 28 USDA Acreage Report. Durum planted acres were down 82,000 from intentions and down 150,000 from a year ago. Winter wheat planted acres were up 284,000 from a year ago, but harvested acres were down 1.5 million.

Spring wheat was the only class of wheat to show increased carryover stocks (8 percent). They were down 11 percent for hard red winter, 45 percent for soft red and 27 percent for durum.

Feed and residual use of all wheat was reduced 25 million bushels from last month and 10 million from a year ago. Most of the reduction was made in soft red winter. When food use is considered, domestic use of all wheat remained about the same as a year ago.

Although all wheat exports were projected to be down from a year ago (same as last month), hard red spring exports were projected to be up 25 percent. White wheat was also up 7 percent but hard red winter was down 9 percent, soft red winter was down 42 percent and durum was down 22 percent.

The seasonal average farm wheat price was projected to be $2.75-$3.35, up from $2.65-$3.25 last month. The average was $2.78 last year and $2.62 two years ago.

World ending stocks of wheat for 2002-03 were dropped 9 million metric tons from a month ago due to a cutback in anticipated production and are now expected to be 13 million metric tons below a year ago. Despite the drop for this year, production is expected to be similar to a year ago. Major changes relative to a year ago include carryover that is down 8 million metric tons and food use that is up about 7 million metric tons.

Wheat production was down this past month in Argentina, Canada, Romania, Ukraine, China and India but up in the European Union (EU) and North Africa. The EU, Eastern Europe and Kazakstan are expected to fill most of the void in exports projected for Canada and especially Argentina. China is expected to use carryover stocks to make up for production losses and to replace 1 million metric tons of imports. The only change made for Australia was a half million metric ton increase in carryover.

Nearly a million more acres of corn were planted than what was reported last month. Ending stocks were raised accordingly since the only other change in the corn balance sheet was a small decrease in projected exports. The price projection was reduced from $1.90-$2.30 to $1.80-$2.20. The price averaged $1.91 last year.

Soybean planted acres were down a half million from last month and carryover was reduced by 30 million bushels. A reduction in total use offset only a part of the supply loss so ending stocks decreased from 265 million to 230 million bushels. The seasonal average price was increased from $4.00-$4.90 to $4.15-$5.05. The average was $4.30 last year.

South American soybean production is expected to exceed U.S. production for the first time. Increased production plus a pull down in stocks by South America is expected to put pressure on U.S. exports. USDA projected that U.S. exports would decrease by 90 million bushels relative to a year ago. The reduction was increased by 10 million this past month.

Barley planted acres were raised slightly from a month ago although harvested acres remained the same. The projected yield was reduced from 62.1 to 59 bushels per acre. Unfortunately, carryover stocks were raised 9 million bushels which offset much of the 13 million bushel decrease in production. Feed use was reduced 10 million bushels which resulted in a 6 million bushel increase in ending stocks. The seasonal average farm price was reduced from $2.05-$2.45 to $1.95-$2.35. Last year it was $2.23.

Similarly, carryover stocks of oats were about 8 million bushels greater than expected in the June Supply and Demand Report. Yields were reduced by about 5 bushels per acre resulting in about a 7 million bushel decrease in production. Supply and ending stocks were raised by 1 million bushels accordingly. The average farm price projection remained at $1.00-$1.40 versus $1.58 a year ago.

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Source: George Flaskerud, (701) 231-7377, gflasker@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu