WASHINGTON, D.C. – American government economists are predicting wheat prices this year will plunge by 20 percent, the victim of high stocks and stable import markets.
“That is a big drop and it will take its toll,” said Peter Riley, grains analyst with the United States Department of Agriculture. “We think prices will rebound again within a few years.”
Price drop expected
His prediction during the USDA annual agricultural outlook forum is that 1997 wheat prices will fall to $3.45 (U.S.) per bushel from $4.30 in 1996-97.
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Then, Memphis-based grain analyst Bradley Anderson with Sparks Companies Inc. suggested USDA was being too optimistic. He predicted prices will fall to $3.25.
Even Agriculture Canada analyst Brian Paddock accepted that wheat prices will fall sharply. He said the Canadian government is not as optimistic that prices will bounce back as quickly and as sharply as the U.S. government believes.
“Agriculture Canada is less optimistic about wheat prices,” he told the outlook conference.
So was David Hull, an agricultural analyst with the congressional budget office in Washington.
The U.S. government prediction of farm prosperity just around the corner, once the near-term price drop happens, was “too doggone optimistic.”
There were a number of USDA assumptions behind the prediction of lower wheat prices during the next year.
Last year’s record-high prices produced a boom in planting and production in the U.S., Canada, Argentina and Australia. That led to an increase in supplies this year.
Meanwhile, there is uncertainty about how much wheat and grain China will import this year.
The prospect is for higher carryover stocks and lower prices in exporting countries, leading to fewer wheat acres planted this year.
Based on information presented to the agricultural forum by European officials and American farmers, this year’s expected lower prices will have several fallouts.
Lower production
American farmers will reduce wheat acreage by as much as seven percent this year, perhaps turning some land back into the conservation reserve program.
And lower world prices will induce the European Union to continue subsidizing European exports into the lower-priced world market.
In Canada, it could mean a sharp reduction in Canadian Wheat Board initial prices at the Aug. 1 beginning of the new crop year.
