What Happened to Wheat Prices? Professor Dave Buschena Dept. of Ag. Econ. & Econ.
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What Happened to Wheat Prices? Professor Dave Buschena Dept. of Ag. Econ. & Econ
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Transcript of What Happened to Wheat Prices? Professor Dave Buschena Dept. of Ag. Econ. & Econ.
What Happened to Wheat Prices?
Professor Dave Buschena
Dept. of Ag. Econ. & Econ
What ^the h Happened to Wheat Prices, And What’s
Next?
Professor Dave Buschena
Dept. of Ag. Econ. & Econ
Wheat Futures Show Weakening in Since Mid-JuneWheat Futures, Mid-week
0
2
46
8
10
12
2-A
pr
16
-Ap
r
30
-Ap
r
14
-Ma
y
28
-Ma
y
11
-Ju
n
25
-Ju
n
9-J
ul
23
-Ju
l
6-A
ug
20
-Au
g
3-S
ep
17
-Se
p
1-O
ct
15
-Oct
Date
$/b
us
he
l
CBOT KCBOT MGEX
Some Likely Suspects
• Wheat Production Increased
• The Value of the U.S. Dollar Changed Since the Spring
• The Global Economy is Weakening
Some Likely Suspects
• Wheat Production Increased
• The Value of the U.S. Dollar Changed Since the Spring
• The Global Economy is Weakening
World Wheat Production and Stocks Increased
World Wheat Production
0
200
400
600
800
1000
2007/08 2008/09,August Est.
2008/09, Sept.Est.
MM
T
Production Ending Stocks
Production Up in Most Key Exporters
0
100
200
300
400
MMT
2007/08: 611 MMT 2008/09: 676 MMT
Wheat Production, Key Exporters
EU-27 U.S. Russia Canada
Argentina Australia Kazachstan Ukraine
U.S. Wheat Production Increased
U.S. Wheat Production
0
20
40
60
80
100
2007/08 2008/09, Aug.Est.
2008/09, Sept.Est.
MM
T
Production Ending Stocks
U.S. Wheat of all Classes Increased
HRW HRS SRWhite
Durum
2007/08
2008/090
200
400
600
800
1000
1200
Million bushels
Class
U.S. Wheat by Class
Some Likely Suspects
• Wheat Production Increased
• The Value of the U.S. Dollar Changed Since the Spring
• The Global Economy is Weakening
Percentage Change in Exchange Rates from Jan., 2008. Currency/$1 U.S.
0.9
0.95
1
1.05
1.1
1.15
1.2
Jan. Feb Mar. Apr. May June July Aug. Sept. Oct.
Date
% C
ha
ng
e
Yen/$1 Peso/$1 Euro/$1
The Change in the Dollar During the First Half of 2008 was Modest
Some Likely Suspects
• Wheat Production Increased
• The Value of the U.S. Dollar Changed Since the Spring
• The Global Economy is Weakening
Global Stock Indices Show Weakening in the Last Half of 2008,
Particularly in OctoberClosing Stock Indices
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1/4
/20
08
2/4
/20
08
3/4
/20
08
4/4
/20
08
5/4
/20
08
6/4
/20
08
7/4
/20
08
8/4
/20
08
9/4
/20
08
10
/4/2
00
8
Date
% o
f J
an
. 1 V
alu
e
Nekkei Dow DAX
Wheat Futures Show Weakening in Since Mid-June. Why?
Wheat Futures, Mid-week
0
2
4
6
8
10
12
2-A
pr
16
-Ap
r
30
-Ap
r
14
-Ma
y
28
-Ma
y
11
-Ju
n
25
-Ju
n
9-J
ul
23
-Ju
l
6-A
ug
20
-Au
g
3-S
ep
17
-Se
p
1-O
ct
15
-Oct
Date
$/b
us
he
l
CBOT KCBOT MGEX
What Happened to Wheat Prices?
• Wheat Production Increased by 10% globally, 20% in the United States.
• The Value of the U.S. Dollar Changed Since the Spring: There isn’t much support here.
• The Global Economy is Weakening: This effect is recent, primarily October.
The Silver Lining: Results from MSU Ag. Marketing Students Poll
• Fuel and Fertilizer Prices Should Drop: – Dyed Diesel $2.25-$2.50– Urea Prices $450/ton– Machinery Prices and Availability Should Moderate.
• Carry out your own estimates using Excel Calculators from Duane Griffith at MSU:
– http://www.montana.edu/softwaredownloads
Price Projections
• Breakeven Prices Should be at least $1 per bushel lower than in 2007/2008.
Below $5 for HRW.
Below $6 for HRS.
• North Central Montana Estimated Prices– Hard Red Winter, 12%: $6.20– Hard Red Spring, 15%: $7.80
