Four key reasons come to mind for the recent price strength in wheat and rice prices.

First, the collective real or anticipated impacts of the Fed’s determination to manage deflation; second, global growth is showing signs of improvement; third, rapid emergence of global weather problems and future weather uncertainty; and fourth, speculative activity due to market uncertainty.

Wheat’s accelerated price advance from a recent June price low of $4.26 per bushel to wheat’s recent 85 percent price advance to $7.89 reached on Aug. 6 brings back memories of wheat price momentum during the 2007-08 period and the global food crisis.

Rice’s price movement has been less spectacular. Rice had a recent June price low of $9.60 per cwt. and a recent high on Aug. 5 of $11.30 per cwt. for an 18 percent price move. During this same period corn prices advanced 28 percent and soybeans prices were up 17 percent.

Is there a global shortage of food grains?

USDA’s Foreign Agricultural Service in its “Grain: World Markets and Trade” circular, makes several key points worth considering given the recent run-up in food grain prices. Bottom line: There is “no global shortage of food grains.”

On wheat I like the USDA’s following statement: “Expectations that wheat prices in the next few months will hit the record levels of 2007-08 levels are not substantiated by the reality of the global supply situation. Black Sea (Russia, Ukraine, Kazakhstan) wheat exports are expected to plummet 60 percent (21 million metric tons) on drought-reduced crops. However, traditional exporters, particularly the United States, are holding large supplies that are more than sufficient to compensate for the Black Sea shortfall. In fact, U.S. ending stocks at 26 million tons are three times larger than just a few years ago.”

On global rice production and consumption USDA’s following statement should be noted: “Rice production growth continues to outpace consumption. Record production is expected in major exporting countries such as Thailand, Vietnam, and the United States. Record crops are also expected in large erratic importers such as Indonesia, the Philippines, and Bangladesh. With the bulging government stocks that Thailand is planning to release and large stocks in India, we are looking at ample global rice supplies and stiff competition for export markets.”

What is the outlook for global wheat ending stocks?

2010-11 global wheat production is estimated at 645.7 million metric tons, which is below projected global consumption of 664.9 million metric tons, but ending global stocks are still projected to be the second highest in the current nine marketing periods.

What is the outlook for global rice ending stocks?

2010-11 global rice production is projected at a record 459.2 million tons, significantly above the previous 2008-09 record production of 448 million metric tons. World rice ending stocks at 97.5 million metric tons exceed the previous seven years as the world becomes more food security conscious.

What is the outlook for the U.S. rice crop?

This year’s total U.S. rice crop (2010-11) is projected to be a record 245.9 million cwt., up 26.0 million from the previous rice crop (2009-10), according to USDA’s first survey-based forecast released Aug. 12. The previous record was set in 2004 with 232.4 million cwt.

U.S. total rice supplies for 2010-11 are now projected by USDA at a record 299.8 million cwt., up 29.9 million from the previous marketing year. The previous record was 2005’s 278.1 million cwt.

Total 2010-11 U.S. rice ending stocks at 56.8 million cwt. are the highest since 1985-86.

2010-11 U.S. long grain rice projections:

• Record production — 187.2 million cwt.

• Record total supply — 266.1 million cwt.

• Total exports — fifth largest at 80 million cwt.

• Total use — second largest at 179 million cwt.

• Ending stocks — second largest on record at 47.1 million cwt.

2010-12 U.S. medium grain rice projections:

• Production — fifth largest at 58.6 million cwt.

• Total supply — 12th largest at 71.3 million cwt.

• Total exports — second largest at 34 million cwt.

• Total use — second largest at 64 million cwt.

• Ending stocks — second smallest at 7.3 million cwt

FSA 2010 preliminary certified Arkansas rice data

Farm Service Agency’s 2010 preliminary certified Arkansas rice data shows Arkansas rice producers with 1.59million long grain rice acres, 192,003 medium grain rice acres, and a record total rice acres of 1.78 million acres. NASS current Arkansas rice harvested acreage estimate is 1.68 acres for a difference of 104,585 acres. USDA’s June acreage report estimated Arkansas at 1,53 acres of long grain rice harvested acres and 149,000 acres of medium grain rice.

What is the price outlook for rice and wheat prices?

Realistically if you want to gain perspective about the big picture, review USDA Supply and Demand Balance Sheet.

USDA’s average all rice farm price for the three most current marketing periods are: 2008-09, $16.80 per cwt.; 2009-10, $14 per cwt.; and 2010-11, $10.75-$11.75 per cwt.

USDA’s average long grain rice farm price for the three most current marketing periods are: 2008-09, $14.90 per cwt.; 2009-10, $12.80 per cwt.; and 2010-11, $9-$10 per cwt.

USDA’s average medium grain rice farm price for the three most current marketing periods are: 2008-09, $24.80 per cwt.; 2009-10, $17.80 per cwt.; and 2010-11, $17.00-18.00 per cwt.

USDA’s U.S. wheat farm price for the three most current marketing periods are: 2008-09, $6.78 per bushel; 2009-10, $4.87 per bushel; and 2010-11, $4.70-$5.50 per bushel.

The more immediate question of price movement involves ones expectation about how robust U.S. government policy will be in managing deflation, the strength or weakness in global growth, emergence of additional global weather problems or the underlying potential weather problems, and lastly, the level of speculative activity. Also, refer back to the question “Is there a global shortage of food grains?”