While you are twiddling your thumbs, awaiting Friday morning’s Planting Intentions Report, you pick up USDA’s latest analysis of the domestic and global wheat market. Corn growers will have some passing interest in the report since some wheat acres could be torn up for corn planting, and wheat will supply part of the cattle market if corn prices don’t soften for the livestock industry. As a matter of fact, there is a lot in the report impacting the corn grower whose pause button has been pushed.

To refresh your memory about the wheat market, declining acreage and a drought in 2006 produced the smallest US crop in 35 years. And that produced some of the highest prices in many years, pushing farmers to plant more acres last fall attempting to book some $5 wheat in 2007.

New Crop Outlook
As wheat comes out of dormancy, the new crop is expected to be about 60 million acres, up 2.7 million from last year. Trend yields would produce about 2.170 billion bushels and the increase over 2006 more than offsets last years’ shortfall. Total use for the new crop will be 2.236 billion bushels, about 210 million higher than last year. USDA says, “This forecast is largely influenced by high prices generated by reduced wheat production worldwide in 2006/07 because of weather problems in the United States and elsewhere in the world and rising U.S. ethanol demand for corn.”

Just like the corn and bean markets, the wheat market contains some healthy prices, resulting from the demand-driven corn market. Both soybeans and wheat have to battle for acres, and that is keeping premium prices currently. USDA believes the higher prices, and increased foreign production will dampen exports to 925 million bushels, only 50 million more than what was exported from the old crop. But more than an additional 150 million bushels of wheat will be fed to livestock. Domestic food use is slowing due to the consumer preference for low carbohydrate diets. USDA believes that will result in a $4.30 season average farm price.

Domestic Old Crop
When the marketing year ends in June, the total domestic use of the old crop will closely compare to the prior crop with slightly higher food use and slightly lower feed use. Exports will be about 875 million bushels, a 134 million bushel decline caused by higher prices. Smaller U.S. wheat exports drop the projected U.S. share of the world export market from 24% in 2005/06 to 22% for the current marketing year. The ending stocks of wheat for 2006/07 are down nearly 100 million bushels from 2005/06. The sum of the hard-wheat ending stocks is about 300 million bushels, the lowest since 1995/96.

Global Crop
The US was not the only nation with a shortfall in wheat production last year. Key producing countries such as the EU and Russia were down 5-6% from heat in Europe and reduced acreage in Russia. But Australian production was down 58% from a drought. Canada and Argentina both had good crops and kept up their export business, with a 20% increase for Argentina and 31% increase for Canada. The latter was also helped by currency relationships. Buying wheat last year was India, which boosted its imports to the highest in 30 years due to demand. That is a significant shift from the prior 6 years of exporting wheat. Worldwide, 109 million metric tons of wheat will be traded, about the same as the two prior years. Global wheat use for the current marketing year is expected to be down 1% due to smaller production and higher prices. Most of the decline will be reduction of wheat feeding in Europe with producers switching to lower priced barley. With world production sliding for the past 2 years, ending stocks are expected to be at the lowest level in the past 25 years.

Summary:
US wheat producers will raise about 2.7 billion bushels and we’ll use a bit over 2.2 billion bushels this year. Increased production results from higher prices, caused by low production and acreage last year. But major world producers also had a short crop in 2006, causing higher prices that tended to ration use, but still result in declining stocks both domestically and globally. The new US crop still has its future to be written with some acreage expected to shift to corn production on the fringe of the corn belt.