Wheat led the commodity markets into a five-year bear market. Will wheat be the first one out of the low-price doldrums?

Maybe the more important question is, “Does it even matter as long as the soybean loan rate remains at $5.26?

In USDA's May 10 supply and demand reports, the agency forecast wheat ending stocks at 829 million bushels, unchanged from last month's estimate. New crop ending stocks were pegged at 591 million bushels, the smallest since 1996/97.

USDA also forecast the world stocks to use ratio for wheat at 23.6 percent, the lowest since 25.5 percent in 1996, when wheat prices jumped to $6 and $7.

USDA also adjusted Chinese wheat stocks upwards from last month's estimate by 40.4 million metric tons and world wheat stocks went up by a similar amount. “But world wheat stocks are still at a record low,” said Dan Basse, analyst with AgResource Co., “even though the number was larger than what we were anticipating.”

“The worldwide numbers in wheat are finally starting to become realistic,” said James Rooney, president of Rooney and Associates, referring to the USDA report, which included “some spring cleaning” of previous estimates going back 10 years.

The U.S. wheat situation is also turning bullish. USDA projects record low acreage and the highest abandonments in years.

Winter wheat production at 1.341 billion bushels was 90 million bushels below the average trade guess and the lowest since 1978. Kansas — which has been of particular interest to the market — has a projected abandonment rate of 12 percent, compared to 4 percent last year.

Rooney added that 60 percent of the U.S. winter wheat crop is listed in very poor to fair condition. All wheat production, projected at 1.961 billion bushels, is the smallest crop since 1988, a drought year.

“We in a transition year from something bearish to something a little more bullish,” Rooney said. “In 1996/97, wheat was the first market that led us down in to a bear market. It now appears that wheat should be the first market that starts to take us out.”

On the other hand, “We have to get more market forces into our ag policy. How many soybean acres are we going to plant next year if the soybean loan rate is out of kilter. It has to be addressed.“

Basse too, is critical of ag policy's impact on the wheat outlook. “In this country, the wheat market is going to have to compete with the $5.26 soybean loan rate. Longer term, the spreads could really get out of kilter with wheat needing to buy acres away from oilseeds.”

Given the lower ending stocks, a projected price range for 2001/02 is $2.75 to $3.35 per bushel, according to USDA, compared with an estimated $2.63 for 2000/01.

USDA's May 10 supply and demand report forecast old crop soybean ending stocks at 295 million bushels, down from last month's estimate of 300 million bushels. The agency projected new crop soybean ending stocks at 500 million bushels.

USDA projected U.S. ending stocks for old crop corn at 1.998 billion bushels, up from last month's 1.951 billion bushels. New crop corn ending stocks were estimated at 1.918 billion bushels.


e-mail: elton_robinson@intertec.com