Wheat Market Outlook
Vol. 18 No. 86 - October 30, 2009 - PDF Version
Market Situation
USDA included crop conditions for U.S. winter wheat in this week’s Crop Report. The crop is getting off to a good start with just over 60 percent in the good and excellent categories. Only five percent was rated as poor or very poor.
In Texas, the wheat condition score increased slightly this week, up 3 points to 336. The crop condition score at this time last year was 346. Many of the hard red winter wheat growing areas received rain this week which should boost condition scores next week. However, continued wet weather in soft wheat country (eastern half of US) is delaying plantings, some of which may not get planted at all.
It rained this week in the Australian wheat belt. But in a situation to which many Texas producers can relate, the most rain came where the drought was the worst and they are now trying to harvest (the northeast production areas). The further south and west you go in wheat country, the more likely the moisture was beneficial to this year’s crop.
The supply of world wheat is adequate given current demand projections. As such, wheat prices will likely be more of a follower of other markets than a price leader. One market that may be set to influence other grains is rice. World rice production in the 2009/10 marketing year is projected at 433.51 mmt, down from 444.85 mmt the year before. Rice use is projected to increase, from 435.83 mmt in 2008/09 to 438.14 currently. The stocks to use ratio for rice is estimated at 19.5 percent, down from 20.6 percent last year.
In Commodity News on Thursday, a daily market analysis put out by the CME Group, attention was drawn to the possibility of a significant increase in rice imports by India. While India is the world’s second largest consumer of rice, it is a minor player in world trade. According to USDA PSD data, India has imported virtually no rice over the last ten years and exports annually about 3.7 mmt. With this year’s drought reduced crop, USDA estimates Indian rice exports to fall to 1.5 mmt and its stocks to use ratio to be about 11 percent, the lowest since the 10 percent ratio in 2004/05 and well below the 30 percent levels earlier this decade.
After a sharp drop in rice production in 2009, some in the trade are speculating that India could enter the world rice trade in 2010 in a big way—importing up to 3.5 mmt. If this were to be the case, India would move from being a net exporter of rice to the world’s leading importer. A 3.5 mmt level of imports would be more than 10 percent of the expected world trade in rice which is estimated at 29 mmt. The sudden entry of a major new importer would strain rice stocks in a year when production is down and use is up. The likely spillover effect of this scenario would be added volatility in other grain markets.
Kansas City wheat gave up 50 cents on the week but is up over prices at the end of September by over 20 cents on the nearby contracts.
| Futures | Friday October 23 | Friday October 30 | Weekly Net Change | Weekly Percentage Change | October Net Change | October Percentage Change |
| Dec ‘09 KC Wheat | 5.4950 | 4.9900 | -0.5050 | -9.19% | 0.2250 | 4.72% |
| July ‘10 KC Wheat | 5.8825 | 5.3775 | -0.5050 | -8.58% | 0.2225 | 4.32% |
| July ‘11 KC Wheat | 6.4525 | 5.9525 | -0.5000 | -7.75% | 0.1125 | 1.93% |
Wheat Marketing Strategies
Wheat continues to follow the trends in other grain markets. Supply questions related to 2010 acreage and condition and the size of the crop in the southern hemisphere are important, but likely secondary to broader economic concerns. If economic indicators continue to edge upward, I expect price strength in commodities generally this winter and better pricing opportunities for wheat to follow.
Mark Welch
Texas AgriLife Extension Economist
401 C Blocker Building
TAMU 2124
College Station, Texas 77843
Tel. (979)845-8011
Fax. (979)845-4906
JMWelch(at)ag.tamu.edu
The opinions and recommendations expressed are solely those of the author and are intended for educational purposes only as part of the Texas AgriLife Extension Service. Texas AgriLife Extension Service assumes no liability for the use of this newsletter. Educational programs of the Texas AgriLife Extension Service are open to all people without regard to race, color, sex, disability, religion, age, or national origin. The Texas A&M University System, U.S. Department of Agriculture, and the County Commissioners Courts of Texas Cooperating