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2014 Outlook: Expect Big Wheat Crop, Mildly Bearish Prices

November 18, 2013
By: Nate Birt, Top Producer Deputy Managing Editor google + 
iStock Wheat

Editor's note: This is one of seven 2014 marketing outlooks, the editors are providing to help you succeed and be profitable in the coming year. Please check back each Monday for another outlook.

High ending stocks and a record corn crop this year likely will cap the upside price potential for wheat next season, experts say.

In 2014, experts say, expect a good year for U.S. wheat. While prices will be somewhat bearish thanks to a large corn supply for feed and strong wheat production globally, planting conditions have been ideal and the crop appears healthy.

"Looking forward to next summer’s prices, July 2014 wheat futures are currently trading for $6.78/bu. and have been declining since the last week of October," says Brian Williams, economist for Mississippi State University Extension Service. USDA has not published its 2014 acreage estimates, but private estimates indicate the crop will be larger than in 2013.

Past Season Yields Clues for Year Ahead

Consider how far the crop came this past year, when U.S. wheat had a rough go. At planting, stands looked poor as effects of the 2012 drought persisted. At harvest, field work happened slower than normal.

"A lot of corn just got backed up probably two to four weeks later than normal, and that backed up wheat planting, too," says David Reinbott, University of Missouri Extension, who serves an eight-county region in southeast Missouri.

But with help from plenty of precipitation and a cool spring, national yields turned out to be surprisingly high at 47.2 bu. per acre, eased fears that supplies would drop beneath the 90-day threshold. Reinbott says southeast Missouri farmers saw per-acre yields ranging from 60 to 80 bushels.

In Minnesota, farmers generally saw a decent spring wheat crop, though it was not as high in protein as in 2012, says Ed Usset, University of Minnesota Extension.

Internationally, wheat production increased roughly 50 million metric tons compared to the previous year.

Opportunities Remain for Good Prices

That international market will be an important factor for U.S. wheat prices heading into 2014 and the 2014-15 marketing year, experts say. Australia and Argentina are harvesting their wheat crops right now, and the quality of those crops will be key.

For example, Australia is expected to have a large crop of hard red winter wheat, though the crop will have below-average protein, says Kim Anderson, Oklahoma State University Extension.

Meanwhile, the U.S. crop saw excellent protein levels this year.

"Will our price come back up? I suspect it will as we get out in the January/February time period unless Australia’s protein is really good and they have really good milling characteristics," he says.

Prices in Oklahoma have averaged about $7/bu. this year for hard red winter wheat, and while they’re likely to be slightly lower for the 2014-15 marketing year, strong protein and milling characteristics coupled with tight ending stocks should keep prices favorable.

"I think it’s safe to say that right now, if you were projecting to June of 2014, that we will have a 1 billion bushel hard red winter wheat crop," Anderson says. "If that’s the case, then in the 2014-15 marketing yea, it looks like we will rebuild the hard red winter wheat stocks."

There are several other significant international stories playing out, Usset adds. On a positive note, China is importing large amounts of wheat. On a less positive note, Canada is experiencing all kinds of logistics problems in hauling off its blockbuster wheat crop. Basis levels also are reportedly very wide.

That reality, coupled with the fact that 15% of wheat production worldwide goes to feed, makes it difficult to imagine a scenario in which wheat could mount a great upward price surge.

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