The Chicago Board of Trade (CBT) March wheat contract price is about $0.16 above the CBT March corn contract price. The CBT December 2012 wheat contract is $1.72 above the CBT December corn contract price. Wheat prices are not currently dependent on corn prices and are not expected to be dependent on corn prices during the 2012/13 marketing year.
Since January 4, CBT March wheat contract prices have increased $0.24 compared to CBT March corn prices.
Higher wheat prices compared to corn may be attributed to increased export demand for soft red winter wheat. The former Soviet Union (FSU) countries (Russia, Ukraine, and Kazakhstan) and the European Union have sold most of their exportable wheat for the 2011/12 marketing year. U.S. soft red winter wheat is reported to be the lowest-priced wheat in the export market.
This export opportunity is projected to last until late June. The FSU countries’ harvest period corresponds with the U.S. winter wheat harvest. If FSU wheat production is above average, FSU countries may release old crop wheat for export in late May or early June.
At this writing, the CBT March corn contract price is $6.39, and the CBT March wheat contract price is $6.55. The KCBT March wheat contract price is $7.08. The CBT December 2012 wheat contract price is $7.12, and the CBT December corn contract price is $5.69. The difference between CBT wheat and corn contract prices increases from $0.16 for the March contracts to $1.43 for the December contracts.
Wheat prices are expected to increase between now and December, and corn prices are expected to decline. CBT corn prices are projected to decline $0.70. CBT wheat prices are expected to increase $0.57. KCBT wheat prices are projected to increase $0.47. The increase in wheat prices is essentially for the storage and interest costs.
Lower corn prices may be due to expected 2012 corn production and higher corn stocks. Allendale, Inc., and Informa have projected that 2012 U.S. corn planted acres will be about 94 million acres.
If 2012 corn planted acres are 94 million, average yield is 154 bushels per acre, and 92 percent of the planted acres are harvested, 2012 U.S. corn production would be 13.3 billion bushels.
If beginning stocks are 850 million bushels and 2012 corn production is13.3 billion bushels production, the total 2012/13 marketing year corn supply would be 14.15 billion bushels. Assuming 2009/10 and 2010/11 marketing year use of 13 billion bushels (note that 2011/12 corn use is projected to be 12.7 billion bushels), 2012/13 corn marketing year U.S. corn ending stocks would be 1.15 billion bushels.
Reason for lower corn prices?
Both the 154 bushels per acre average yield and the estimated 2012/13 marketing year use are conservative. The 2012/13 corn marketing year ending year stocks could easily be 1.3 billion bushels. This possibility may be the major reason for the projected lower corn prices.
U.S. wheat ending stocks for the 2012/13 wheat marketing are expected to increase from 850 million bushels to above 900 million bushels. World wheat ending stocks are projected to exhibit a small increase from the current 7.7 billion bushels.
The average June through August 2011 wheat price for Oklahoma was about $7.65, and the average price for the Texas and Oklahoma Panhandle region was about $7.50. The 2012 June through August prices are expected to average in the $6 to $6.50 range.
Higher 2012/13 marketing year corn stocks are expected to complete the divorce of wheat and corn prices.
Expected higher 2012/13 marketing year wheat stocks should have a negative impact on wheat prices. The result is that 2012/13 marketing year wheat prices will probably average $6.25 compared to $7.20 during the 2011/12 wheat marketing year. Corn prices should be significantly lower than wheat.