October 3, 2002

Market Advisor: USDA Says Less Wheat Available

By George Flaskerud, Crops Economist
NDSU Extension Service

Stocks of all wheat and production of spring wheat were below the average of trade expectations in the reports released by USDA on Sept. 30. Stocks were within the range of expectations, but production was below even the lowest estimate.

Price expectations for spring wheat may need to be raised another notch after those reports. The Minneapolis December wheat futures contract had reached a high of $5.21 prior to the reports on Sept. 9. December futures near $5.50 may now be within reach.

It’s getting close to that time of the year when Minneapolis wheat futures tend to reach a fall peak. They tend to peak during November, on average, so scaling-up sales of remaining inventory into that time-frame would be a reasonable strategy. The November peak also applies to durum.

Hard red spring wheat production was down 11 percent from the August estimate. Hard red winter was down 3 percent, soft red was down 2 percent while white and durum were up 1 percent each. All wheat production was down 4 percent.

Hard red spring production was down 23 percent from a year ago. In North Dakota, spring wheat production was down 28 percent, because of a reduction in harvested acres and yield. About 87 percent was harvested instead of the typical 95 to 98 percent and the yield was 28 bushels per acre versus 34 bushels a year ago. At the national level, the spring wheat yield per acre was 29.5 versus 35.2 a year ago.

Durum production was 80.2 million bushels versus 83.5 million a year ago, In North Dakota, 50 million bushels were harvested versus 54.6 million a year ago.

A significant portion of the reduction in wheat stocks was likely due to the reduction in production. Relative to average trade expectations, they were both down a similar amount, which implies that the level of wheat feeding may have been about as expected.

Barley production and stocks were both down 9 percent from a year ago. More importantly, the production estimate was 10 percent below the August estimate. According to the USDA report, this year’s production is the lowest since 1937. The average U.S. yield was 54.9 bushels and 46 in North Dakota. The Minnesota yield was only 39 bushels per acre. The average was 42 in Montana and 41 in South Dakota.

Oats production was 2 percent above a year ago but 16 percent below the August estimate. Stocks were down 4 percent from a year ago. A yield of 56.8 bushels per acre was estimated nationally versus 61.4 a year ago. In North Dakota, the average yield was 44 bushels versus 62 a year ago. North Dakota production ranked number one last year but fourth this year.

Barley and oats prices should be well-supported by the reports. As for spring wheat and durum, November stands out as one of the better months for making sales.

The stocks report for corn was not much of a surprise. Stocks did come in below trade expectations but not by very much (2 percent below the average). Corn and soybeans were not included in the production report which was limited to small grains.

The stocks report for soybeans was a surprise, but on the negative side for price. USDA found 18 million bushels more than the trade expected and 15 million more than they had estimated in the September supply and demand report as ending stocks for the 2001 marketing year.

Corn and soybean prices may be under pressure until after harvest. Early harvest reports indicate better than expected yields. Price weakness in these markets may also affect the wheat market.

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