NEW ORLEANS, La. (Staff) — By next year, world wheat supplies could be the tightest they’ve been since 1970.
And that should mean higher prices, says market analyst Dale Gustafson, director of grains and oilseeds research for Smith Barney Shearson.
He told 700 farmers at the annual convention of the U.S. National Wheat Growers Association that by June 1995, world stocks of wheat could be as low as 125 million tonnes.
That would be 13 million tonnes lower than June 1994 and would represent a stocks-to-use ratio of about 22 percent, the lowest in 24 years.
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“The world doesn’t have the comfort level it’s used to,” he said, adding the market in the coming year will be “dynamic, volatile” and “incredibly sensitive” to the weather.
“The fact that U.S. stocks of feed grains and oilseeds are at critically low levels will exacerbate price sensitivity to any unusual weather developments in 1994.”
Gustafson said the short supply should produce a nearby futures price of about $3.40 (U.S.) a bushel, compared with an average of about $3 so far this crop year.
“For the new crop, I will be surprised if it trades below $3.30 to $3.35,” he said, adding that prices could rally into the $3.65-$3.75 range if there are crop problems. The December 1994 contract could rise to $3.80-$3.90.
Gustafson expects the U.S. to produce 66 million tonnes of wheat in the coming year, which combined with imports and beginning stocks will result in total supplies of 84.3 million. Consumption of 69 million tonnes will leave ending U.S. stocks at 15.4 million.
Spring wheat acreage will likely be a record in the U.S., with production up two million tonnes to slightly more than 17 million.
His forecast also projects smaller crops in Canada, Europe and Australia.
Among importing countries, severe winterkill in Russia and Ukraine will result in a reduction of five to six million tonnes, although whether that will mean increased sales is hard to predict, given the uncertain financial situation in those countries.
