Since trading as high as $12.84 per bushel in March, December wheat has retreated to below $8. “Domestically we have increased our ending stocks,” which are 574 million bushels compared with 306 million last year, says Joe Victor, grain analyst for Allendale Inc. However, he warns that is dangerously thin, and at 17.7% is the third lowest end-stocks-to-use ratio globally since 1980. Despite a rising dollar, the United States will export 41% of the wheat produced, he says, and at 541 million bushels, those exports are 4% above the five-year average. In October, he says wheat will trade between $7.98 and $8.80.
“People who were paying attention and prioritizing their marketing plans, and made some good sales early, are going to have a very good year,” says Jim Bower, president of Bower Trading. The recent declines indicate that the market is working, he says, reflecting increased production and decent yields. He notes global production is up 60 million metric tons above last year. Should yields match USDA projections, Bower says wheat could trade down to $6.97. “Those producers who did use our sell and defend strategy – sell the cash and defend it with a call option – have had a tremendous year. This was not the year to use puts in grains.”
