Matt Roberts, an Ohio State University Extension agricultural economist with the Department of Agricultural, Environmental, and Development Economics, says that the futures price of wheat is around $6.75 a bu., nearly $3 more than the historic average, while the soybean futures price is over $9 per bu.
"If we looked at the 1996-2006 crop years on average, we would expect wheat futures prices to be around $3.50 or $3.75 per bu.," said Roberts. "At the same time, we have seen a price response in the soybean market to stimulate more plantings. The market is auctioning off plantable acres across the three commodities: corn, soybeans and wheat. Prices are rising in each of those crops to try to bid acres into those crops, and soybeans and wheat are where we are seeing the sharpest response."
The corn futures price is at $3.95, compared to $4.20 last year, and is still running high due to continued demand in ethanol production. Corn production in 2007 was the highest since 1933, and as a result, producers planted 11 million fewer acres of soybeans, according to the U.S. Department of Agriculture. A smaller production coupled with increased usage has resulted in an inventory shortage that the markets are trying to rectify, said Roberts.
"This year we used 300 million more bushels of soybeans than we produced, out of a total production of three billion bushels. That's not a sustainable model," said Roberts. "Analysts are already worried about availability for next year, so the soybean market is looking for acres."
Wheat inventories are also low, due to low yields in the United States and around the globe. As a result, current physical delivery wheat prices are sitting at a record-high $9 per bushel.
"The wheat market has become tight, and no wheat is being fed anywhere at that price," said Roberts. "There's just not much wheat available right now around the world, which has sent prices to extreme levels, and U.S. wheat inventories will be very low based on strong export demand."
Roberts indicated that if current U.S. wheat projections hold true come next spring, inventory could be the lowest since 1948.
"The small inventory is not only driven by disappointing yields in the U.S., but also low yields around the globe. Canada, South Eastern Europe, South Africa, Australia, have all seen lower-than-normal wheat yields."
Ohio growers are expected to plant an additional 250,000 acres of wheat this fall. Nationally, demand for wheat has increased to such an extent that little seed is available, especially throughout the eastern Corn Belt.
"The high wheat prices have created such a demand for seed that it's almost impossible to find wheat seed in the eastern Corn Belt," said Roberts.
According to the latest USDA crop production report, 2007 corn production is forecast at 13 billion bushels, 26% higher than last year, and the largest on record. Yields are expected to average 154 bu. per acre. If realized, it would be the second highest yield on record. In Ohio, growers planted 3.8 million acres of corn, but only harvested 3.6 million, due to weather-related conditions. However, growers increased their production from last year by over 70 million bushels. Yields are expected to average 150 bu. per acre.
Soybean production is forecast at 2.6 billion bu., down 19% from last year. Yields are expected to average 41 bu. per acre. In Ohio, growers planted 4.6 million acres of soybeans, but are only anticipated to harvest 4.1 million. Production was down by 27 million bu. from 2006. Yields are expected to average 46 bu. per acre, higher than the national average.