July 31, 2003

 

Market Advisor: Market Giving Opportunity for Wheat Sales

By George Flaskerud, Crops Economist
NDSU Extension Service

Spring wheat prices have recovered most of the May-July decline, providing an opportunity to make catch-up sales. Consider selling a third of the crop or more now if planning to deliver more than that off the combine at harvest.

December spring wheat futures increased from a low of $3.36 on July 11 to a high of $3.77 on July 29. The previous high was $3.85 on May 16. The contract closed at $3.75 on July 29.

Weather gave us the rally. USDA’s Weekly Crop Progress Report on July 28 indicated that 60 percent of the spring wheat was rated good or excellent versus 67 percent the week before and 36 percent a year ago. North Dakota slipped to 72 percent from 76 percent the previous week. Montana dropped 19 points.

In Saskatchewan, the good or excellent rating decreased from 53 percent on July 20 to 46 percent on July 27 according to that province’s crop report. Durum decreased from 35 percent to 28 percent. The wheat crop has also diminished in Europe according to trade reports. The trade is also concerned about planting conditions for the 2004 U.S. winter wheat crop.

The U.S. spring wheat crop will likely be reduced in the next report from USDA on Aug. 12. However, the decline may be partially offset by an increase in the winter wheat crop. U.S. stocks likely will be plentiful. In the July report, USDA projected a U.S. stocks/use ratio of 34 percent.

Will USDA increase projected exports because of decreases in the wheat crop of other countries? Apparently the market believes there will be a strong export demand. As of July 17, however, exports were only on track to achieve USDA’s 2003-04 projection which in the July report was up 14 percent from a year ago. There is no indication yet of unusually strong export demand.

The market is sensitive to world production this year because of low world stocks. At 24 percent, the world stocks/use ratio for wheat is at its lowest since 1974.

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