Carryover surge highlights wheat market evolution

by Josh Sosland
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Josh Sosland

With the latest adjustments by the U.S. Department of Agriculture, the 2017 wheat carryover is forecast at 1,159 million bus, 30 million bus larger than the March projection and 19% larger than 976 million bus in 2016. As recently as 2014, the wheat carryover was only 590 million bus. The April revision effectively ensures the carryover will eclipse 1 billion bus for the first time this century.

In fact, the wheat carryover in 2017 is now projected to be the largest since ending stocks of 1,261 million bus in 1988. Looking at the supply and demand elements of the current crop year against 1987-88 shows how starkly the overall wheat market has changed in the last generation. Wheat exports this year are forecast at 1,025 million bus, 35% less than 1,588 million bus in 1987-88. On the other hand food use in the current year is projected at 960 million bus, up 33% from 721 million bus in the earlier year.

A major difference between the years is that 344 million bus of wheat were owned by the Commodity Credit Corp. in 1988, a figure that fell by more than 90% by 2006 thanks to more market-oriented government farm programs. The average farm price for wheat this year is projected at $3.85, up 52% from $2.54 in 1987-88. The price advance has kept up neither with inflation ($5.23 would be the 1987-88 price in today’s currency) nor with the price of corn, up 75% over the same period. With acreage in wheat for the 2017 crop the smallest of record back to 1919, the challenge for wheat-based foods to reverse the long-term decline is apparent.

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