By Tracy Sayler

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Prairie Grains is the official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain Growers Association,
South Dakota Wheat, Inc., and the Minnesota Barley Growers Association.

Corn (and other feed grains, including barley) will spend the year waiting for a recovery to the Asian economic flu and subsequent weakened export demand. If corn will be burdened by carryover, soybeans will be even worse. Wheat, with an expected decrease in acreage and supply carryover into the 1999-2000 marketing year, offers the most promise for price improvement — but modest at best.

Ray Grabanski, president of Progressive Ag Marketing, Fargo, ND, sees little wheat price movement in cash or futures through January — the lingering effects of a bottom market. Through the end of March, he sees little movement in the futures market, but a slowly improving cash market. There should be a good opportunity sometime in 1999 to sell wheat between $3.75 and $4.00, perhaps from weather-related production scares or unanticipated export demand. When selling opportunities do occur, be quick to take advantage of them, Grabanski says.

Be wary of softer prices after the planting season, as grain loans expire and growers sell stored grain to make room for the new crop. But an expected drop in carryover from the 1998/99 marketing year may help buoy the wheat market, particularly in the latter half of the 1999/00 marketing year (which begins May 31).

When watching long-term wheat price forecasts, keep a close eye on the stocks-to-use ratio of major exporters — the U.S., European Union, Canada, Australia, and Argentina. "It’s the most accurate predictor of price," says Grabanski.

Since 1990, the wheat price has tracked nearly neck-in-neck with the stocks-to-use of major exporters, Grabanski points out. Carryout — leftover grain supply — is a key factor relative to stocks-to-use. It stands to reason that when global wheat sellers have more product on the shelf than the world can use, price will fall. That has been the case since the 1995/96 marketing year.

Jerry Gulke, a marketing columnist for DTN and Top Producer magazine, points out that the stock-to-use ratio in the U.S. is expected to be about 38% in 1998/99 — nearly double what it was in 1996/97, at 19.3%. He is using an early estimate of 32.1% for 1999/00 (based on a 40.6 average bu. yield). He estimates planted wheat acreage in the U.S. to be 5 million less than last year. He is using an early carryout for 1999/00 of 767 million bushels, which if realized would compare with an estimated 919 million bushels for 1998/99, 722 million bushels in 1997/98, and 444 million bushels in 1996/97. We need stocks of 400 to 500 million bushels, or the perception of it, to really get the price up, he says.

Results of the latest Conservation Reserve Program signup could be a short-term market mover, says Gulke. Nevertheless, supplies will be ample enough to absorb surprise demand or a below average crop in 1999, particularly corn and beans.

A major change is needed in the supply/demand fundamentals for a major change in grain prices. That likely won’t happen in 1999. At some point this year, growers may need to sell some stored grain at a price that’s less than desirable, but better than it might be.

"You might need to ask, ‘What is the economic value of the grain I have?’ It may not be breakeven. It may be better to take a small loss rather than a bigger loss later. Ask the hog producer who could have lost a little earlier, and is now looking at $60 to $70 (per CWT) loss. Some day it’s going to turn around. To be in business when good times are here again should be the goal."

Both Grabanski and Gulke offer market advisory services to growers. Contact Grabanski at 1-800-450-1404, email: ray@progressiveag.com. Web site: www.progressiveag.com. Contact Gulke by phone: 815-962-6610.

"Taming the Bulls and Bears" is a market education feature of Prairie Grains, made possible by the Minnesota wheat checkoff administered by the Minnesota Wheat Research & Promotion Council. If you have a question or topic you’d like to see addressed in this feature, send it to: MWRPC, 2600 Wheat Drive, Red Lake Falls, MN, 56750. Phone: 1-800-242-6118. Email: mnwheat @ means.net.

WORLD WHEAT PRODUCTION AND UTILIZATION

Million Bushels