Milling & Baking News - September 21, 2004 - 23

N E W S F E AT U R E
with the current U.S.D.A. projection). But
competing exporters should be able to satisfy other demand, which could limit any
resulting U.S. wheat futures price advances
to perhaps 30c or 40c a bu. But more certain
forecasts would have to await results of the
Canadian harvest.
Mr. Meyers saw no apparent reason for
the U.S.D.A. to raise its export forecast.
"In the last four weeks, U.S. export commitments have gone from being up 18%
from a year ago to last Friday being just 6%
ahead," Mr. Meyers said. "In the next two or
three months, commitments should fall well
below year-ago levels. June-September has
been a period when the U.S. had advantage
over other exporting countries who had yet
to harvest their crops."
Mr. Meyers also said the Southern Hemisphere wheat crops should be large and
would become available this winter, which
should further diminish U.S. export potential.

Forecast trends in wheat futures
Concerns over the quality of the spring
wheat crop should keep Minneapolis wheat
futures prices at wide premiums to both
Chicago and Kansas City contracts. Before
the harvest delays and quality issues arose,
the spread between Kansas City and Minneapolis wheat futures prices had narrowed to
single-digits, with some predicting Kansas
City wheat to even trade above Minneapolis price levels. At mid-September, the
Minneapolis/Kansas City December wheat
spread widened to nearly 30c a bu, and the
Minneapolis/Chicago December wheat
spread was more than 50c.
Mr. Meyers suggested the Chicago December wheat future could trade down
to $3.05@3.10 a bu in the next couple of
months, and the Kansas City December
down to $3.25@3.30. The Minneapolis December future possibly could drop to $3.40
a bu, he said.
Looking longer term, Mr. Meyers said,
"During the next six months, I expect to see
prices move sideways because there will be
no export demand to pull prices higher."
Mr. Meyers also pointed out that planting
conditions for the U.S. winter wheat crop
were the best in years because of good summer precipitation. He said the improved
conditions could encourage hard winter
wheat growers to increase acreage by as
much as 1 million acres from a year ago.
In contrast, Mr. Freed expected wheat
futures prices to trade moderately higher
in the next couple of months. He suggested
the Chicago December contract could rise to
$3.50 a bu, with the December contract in
Kansas City moving up to $3.80. The Minneapolis December contract could advance
to $4@4.10 a bu.
"A lot depends on what type demand develops," Mr. Freed said. He also pointed out

24 / Milling & Baking News, September 21, 2004

that the farmer remained a reluctant seller
of wheat, keeping bins full with the hope of
capturing the carry in wheat futures prices.
At the same time, the market will have to
keep attention on several features that could
affect price forecasts for the coming several
weeks, Mr. Freed said.
"Do we get through the U.S. soybean
harvest without a frost?" he said. "Do we
get through a beginning to the corn and
soybean marketing years without a lot of
demand? Will wheat business shift to the
U.S. because Canadian spring wheat can't
meet grade? How and where will Canada
dispose of its wheat that fails to meet milling grade, and how will this affect world
and U.S. feed markets?"

Suggested flour coverage
Mr. Freed said most bakers have covered
their needs through December, but those
that haven't should do so on any downward
price moves. There was no pressing reason to
book January-March as yet. The market did
not seem to be concerned about the possibility of a real surprise with regard to export
demand, especially with the projected rise in
production in China. After covering OctoberDecember, Mr. Freed said he expected bakers
to continue to book mostly hand-to-mouth.
Mr. Meyers suggested coverage of 30 to
60 days but no more. He said there could
be some downward correction in wheat
futures prices. Also, he said there should be
at least some weakening in hard red winter

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Milling & Baking News - September 21, 2004

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