WHEAT FUTURES

On December 9, 2005, the USDA kept its estimate of 2005-2006 U.S. ending stocks at 530 million bushels, the lowest in three years. Production in the new season is expected to total 2.098 billion bushels with total use of 2.188 billion bushels. The resulting ending stocks to use ratio is 24%, still plentiful. Worldwide, the USDA is expecting 2005-2006 ending stocks to fall from 150 to 143 million tons, or 23% of annual use. 615 million tons of world production is expected to fall short of 622 million tons of total use. The USDA expects 2005-2006 exports to be down 6% and so far, they are down 7%.

Overall, wheat is a chronic bear market and (I get no joy to say it, but) wheat farming has a bleak future. Wheat (like sugar) is grown on every continent, but Antarctica. Farm productivity continues to increase, but consumption is not growing. If not for occasional weather problems, wheat prices would trend endlessly lower. As of November 27, 2005, the final crop progress report of the year, the USDA said that 52% of the winter wheat crop was rated good to excellent, down from 76% a year ago.

Foreign (wheat) production rises due primarily to larger crops in Australia, Canada, China, Uzbekistan, and Kazakhstan...

Consumption is up in a number of countries, with the largest month-to-month increases occurring in Pakistan, Brazil, Australia, Canada, and Uzbekistan.

USDA's World Ag Supply & Demand Estimates. December 9, 2005.

Record global production for the 2004-05 crop year has significantly increased (wheat) stocks. In the face of ample supplies, prices remain under downward pressure and are expected to generally move lower over the next year.

Bank of Montreal's Commodity Price Report. September 21, 2005.