PULLMAN, Wash. — The good news is that the price Northwest farmers will receive for white wheat may increase about 40 cents a bushel in the coming year. This would result in an average price in Portland of about $3.65.
The bad news is that it won’t be enough to thwart a third bad year for Washington’s wheat industry.
This is the assessment of Larry Makus, a University of Idaho economist. It is contained in the 1999 Pacific Northwest Agricultural Situation and Outlook Report, released Wednesday (Dec. 30) by Washington State University, University of Idaho and Oregon State University economists.
Makus said world wheat and coarse grain markets started the 1998- 99 marketing year with more than adequate supplies. This and the Asian economic downturn will continue to pressure world grain prices, already at some of the lowest levels in the 1990’s.
Makus said the 1997-98 world wheat crop of 611 million metric tons is the largest ever and the currently forecast 1998-99 world wheat crop of 585.8 million metric tons is the third largest in history.
Although world use expanded at a rapid 3 percent a year rate during the last three years, record world production has increased ending stocks as well, Makus said.
World ending stocks were 136.6 million metric tons for the 1997-98 marketing year. World wheat production is projected to decrease in the current, 1998-1999 marketing year, but carryover stocks still are expected to be high.
Major exporting countries, including the United States, are projected to increase wheat production for the 1998-99 marketing year.
The 1998 U.S. wheat crop is forecast at 2.557 billion bushels, slightly above 1997’s crop of 2.527 billion bushels. The 1998-99 U.S. wheat carryover is projected to increase by 14.5 percent, or about 105 million bushels.
Makus said the projected U.S. wheat carryover of 827 million bushels is close to the largest carryover of the decade. Only the 1990-91 carryover of 868.1 million bushels would be bigger.
U.S. farm-level wheat prices for 1998-99 are forecast in the $2.60 to $2.80 range, which is just above the 1990-91 level of $2.61.
Makus said U.S. white wheat production dropped to 298 million bushels in 1998, well below the previous two years, but stocks of other classes of wheat continued to hold white wheat prices down. White wheat is the predominate kind grown in Washington.
Portland prices for white wheat dropped to $2.50-$2.60 during September. It costs Northwest farmers 35 cents to 50 cents a bushel to deliver their wheat to Portland.
“Although Portland prices recovered substantially during October, the average Portland price for July through November of 1998 was $2.87 per bushel,” Makus said.
“The world has demonstrated its capacity for increasing grain production when prices are strong and weather cooperates. How the world’s grain producers respond to significantly lower grain prices and weather are key factors for 1999,” Makus said. “Relatively large grain stocks, especially for the United States, suggest production decreases will need to be substantial for a major market recovery. As spring approaches, 1999 world grain crop conditions will become the dominant market force.”
Makus sees some good news in the drop in 1998-1999 world ending stocks of wheat. They are forecast to be about 123 million metric tons. However, Makus said they would have to drop to 105-110 million metric tons before wheat prices recover much.
“Market fundamentals provide little encouragement for a substantial price rally for the remainder of the 1998-99 marketing year,” Makus said.
Any optimism for the coming crop year involves three factors, Makus said:
- The world wheat crop has been at record or near record high levels for three consecutive years.
- 1998-1999 price levels should discourage wheat plantings and reduce world wheat production.
- Lower northwest and U.S. wheat production in 1999.
“The law of averages suggests that favorable weather patterns may not continue and a smaller world wheat crop is the likely outcome,” Makus said.
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