World Awash in Wheat, Supply Must Diminish for Prices to Rise

A perfect storm has struck the wheat industry.

During eight successive years from 2000 to 2008, wheat consumption exceeded wheat production, which drove up the price of wheat and increased production. In seven of the last nine years, world wheat production has set new records. Production this year is expected to hit a new high of 27.3 billion bushels.

During those nine years, however, production has eclipsed consumption.

Hence, the perfect storm.

The world inventory of wheat has climbed from 4.6 billion bushels in 2007/2008 to a projected 9.3 billion bushels in 2016/2017. The world is awash in wheat, and prices will not rise above $5 per bushel until world inventory declines.

Wheat in Oklahoma and the Texas panhandle is hovering around $2.60 per bushel. In Oklahoma alone, more than 10 million bushels may be in temporary storage (bunkers and bags).

How soon the storm passes is tied to planting and growing conditions. Circumstances that diminish production lead us toward balancing supply with demand.

Source: Southwest Farm Press