Harvest is wrapping up in the U.S., and supplies nationally and globally are looking solid.
Wheat prices continue to follow corn prices higher, but supplies of wheat remain ample, both here and around the globe. "Three months ago, analysts were predicting $5 per bushel wheat, now they are talking about $10 wheat," says Peter Georgantones with Abbott Futures in Minneapolis.
The spring wheat harvest, which is wrapping up in Montana, North Dakota, South Dakota and Minnesota, is a bin buster. According to USDA’s latest estimate, growers will harvest 499.5 million bushels of high-protein spring wheat used in bread, pitas and other milling products. That’s a substantial increase—almost 10%—from last year’s 455.5 million bushels.
Harvest in the spring wheat belt has progressed rapidly. As of Aug. 19, 79% of the crop was harvested, compared with 65% a week earlier and 40% a year ago.
The United States and the world have ample supplies of both high-protein, high-quality wheat and lower-quality feed wheat, notes Georgantones. This year, he says there are 20 million to 25 million tons of extra feed-quality wheat. "We have wheat to feed. South America has wheat to feed," he adds.
Typically the nation’s feed wheat comes from soft red winter wheat grown in Ohio, Missouri, Indiana and Arkansas as well as Canada. At the close of trading Aug. 20, September spring wheat was priced at $9.31, with hard red winter wheat at $8.91, and soft red winter wheat at $8.79. Lower-quality feed wheat was selling for about $7/bu.
"We have been on a wheat feeding program for the last year," Georgantones says. "Currently the stocks-to-use ratio for wheat is 28%. We have wheat to feed. If we didn’t have a big wheat crop, corn would be $10/bu. by now."
On June 15, December corn closed at $5.06/bu. On Aug. 20, a mere five weeks later, the price was more than $3.18/bu. higher. "The demand base in corn is being destroyed," Georgantones says. "There is not an animal being fed without a financial loss. The meat people are all under water. That’s why they are liquidating herds."
Looking ahead, Georgantones says, poultry and pig operations will continue to feed corn, while dairy and beef operations struggle to find alternatives to corn or continue to send animals to slaughter. "With corn and soybean prices as high as they are, farmers will plant corn and beans next year, they won’t plant wheat," he adds.
Looking abroad, Russia and Australia have run into problems with their wheat crops due to hot, dry weather. An Aug. 20 estimate from Moscow-based SovEcon cut Russia’s wheat harvest to between 39 million and 41 million tons, a substantial drop from the previous estimate of 40.5 million to 42.5 million tons. If realized, a harvest near 40 million tons of wheat in Russia would be equivalent to the 2010 harvest, when the country was immersed in its worst drought ever. "Russia will be coming to us for spring wheat," Georgantones says.