Until combines start rolling through key winter wheat regions in the United States, markets can only guess how much ill-timed rains, heat and frost have hurt the crop.
But the crop yields will ultimately determine the direction of world wheat prices this year.
This month, concerns about the crop helped push the Canadian Wheat Board’s pool return outlook higher.
Don Bonner, marketing manager with the wheat board, said U.S. weather conditions in the last half of May helped push wheat forecasts higher.
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Farmers seeded the U.S. winter wheat crop into dry soil last fall, and received heavy rains earlier this spring, giving a boost to diseases. Hot conditions are now spurring on those diseases, said Bonner.
A late May frost may also have hurt the U.S. crop.
Prospects for lower yields mean a better chance of lower U.S. stocks at the end of 2000-01, which will lead to firmer prices, said Bonner.
World wheat prices are highly correlated to U.S. wheat stocks, said Glenn Lennox, analyst with Agriculture Canada.
The higher the U.S. stocks, the lower world prices, as evidenced in 1999-2000 when U.S. stocks peaked and world wheat prices scraped bottom.
“I think it’s pretty well accepted U.S. stocks will decline” by the end of the crop year, said Lennox.
He thinks some analysts may have discounted the effects of recent frosts, which reached into southern parts of Kansas, Oklahoma and Colorado. The last time Kansas wheat saw frost was in April 1997. Prices rose sharply, but the state ended up with record yields.
This time, the frost nipped wheat at the critical flowering stage.
“The wheat probably still looks great, but it may or may not have seeds in it.”
Increased demand will also help bring down U.S. wheat stocks, said Lennox.
This year, North African and Middle Eastern countries are expected to buy more wheat because drought has hurt their own crops. Asian economies are picking up, too.
World wheat trade is forecast to reach 107 million tonnes this year, up from 104.6 million tonnes last year, and 100.4 million tonnes in 1998-99.
Canada’s exports are expected to drop because farmers here are growing a smaller crop of wheat, he said. Australian and Argentina will have flat supplies of wheat. Current forecasts show U.S. wheat export sales rising from 29 million tonnes last year to 35 million tonnes in 2000-01.
“A modest increase, but that’s enough to pull down stocks.”
The only other exporter able to fill the increased demand for wheat may be Europe, he said.
The European Union has limits on what it can export with subsidies this year, because of world trade rules scheduled to kick in this summer.
But European currency has dived, and world prices are strengthening.
These factors may mean European exporters can make money shipping at the going world price without subsidies this year, said Lennox. And that would keep a damper on further world wheat price increases.
