In looking at wheat market fundamentals, it doesn’t seem an overstatement to say that demand is taking a beating in 2009-10. The Economic Research Service just reduced its estimate of food use by 15 million bus to 940 million, it left the export outlook unchanged at the smallest in seven years, and it showed no pickup in feed use from usage down 27% from the prior year. The net result is a carryover rise to 900 million bus, the largest since 1999 and nearly three times the total held in 2008.

No wonder that a frequently heard quandary in grain-based foods focuses on why wheat futures have held above $5 and $6 per bu in the face of such bearish statistics. Many reasons may be cited, focusing on inclusion of wheat in numerous index funds meant to represent investing in the asset class, "commodities." Not to be neglected is the way the market recognizes returns farmers must receive to encourage wheat planting and production even in line with these reduced requirements.

Lowering of the food use estimate for 2009-10 was prompted by mill grind data for the first nine months of 2009. The Census Bureau showed output down by a minuscule amount from 2008, mainly in line with smaller flour exports. The likelihood is that domestic flour use is holding steady, which is a positive outcome in a year when both the economy and employment are under severe stress. The main surprise is the lag in wheat exports at a time of marked dollar weakness.