SPOKANE — With export demand down, this year’s high wheat prices may not last, a market analyst says.

“…I’m a little nervous about prices hanging on where they are as we go forward,” said Randy Fortenbery, small grains economist at Washington State University. “Doesn’t mean they can’t, doesn’t mean something won’t happen for a rally.”

He spoke Dec. 2 at the Tri-State Grain Growers Convention in Spokane.

Soft white wheat ranges from $10.65 to $11.50 per bushel on the Portland market. 

Fortenbery said total demand for U.S. wheat on the international market is down to 42.5%. The nation’s average share of the export market since 2016 has been 46.5%. USDA projects about 44.5% of the wheat produced this year will be exported.

Export activity is a key driver of prices at this time of year through late February. If export volume continues to be lower, it will be more challenging to hold or increase prices, Fortenbery said.

The futures market is offering premiums for next year’s crop compared to nearby futures prices, so locking in a percentage of next year’s crop could prove “prudent” and “beneficial,” Fortenbery said.

Farmers should sell any old crop wheat from this year’s harvest, he said. Lag in the current export pace makes storage risky, he said.

Beginning wheat stocks were 845 million bushels for the current marketing year, according to USDA. The agency predicts ending wheat stocks of 583 million bushels in May 2022. That’s about a three-month supply, Fortenbery said.

It’s been roughly 10 years since there’s been such a small supply, Fortenbery said. When the supply is low, prices become more volatile. 

“Regardless of whether the news is positive or negative, we’re going to see a lot of volatility this year as we go forward,” he said. “What becomes challenging in marketing is not to react to that day-to-day volatility.”

USDA currently projects a marketing year average price of $6.90 per bushel. That’s the price that determines whether farmers get a Price Loss Coverage (PLC) crop insurance payment or what the Acreage Risk Coverage (ARC) payment might be.

The PLC trigger price is $5.50 per bushel, so there would be no PLC payment for the 2021-2022 marketing year with a $6.90 price. But the marketing year is only halfway complete, so there’s still room for the price to change.

“If we get towards March and we’re still well above $6 on the marketing year average, then PLC is not likely to pay,” he said. “ARC may not pay either, but as long as we’re well above $5.50. …”

“But I am going to tell you, last January, people were asking me, ‘Hey, what do you think I should do?’ and I said, ‘I think you should be in PLC,’ and it didn’t work out that well,” he said.

According to USDA’s crop progress and conditions report, Montana, Texas and Washington “are in the worst shape,” Fortenbery said, with 7% of the Montana crop and 20% of the Texas crop considered good to excellent, the top category of quality.

Washington’s wheat crop is 22% good to excellent. Idaho and Oregon are 39% and 25% good to excellent, respectively.

About 44% of the nation’s overall wheat crop is considered good to excellent. 

Cash prices in the Pacific Northwest are well above the region’s normal premium over the rest of the country’s average this year due to the poor production year.

“The 22% may not be good news from the standpoint of production, but it might help us sustain the strong premium we have over national prices,” Fortenbery said.

Fortenbery recommends that prices in USDA’s long-term forecast be viewed as a baseline to beat.

“It is important not to get too aggressive in terms of price expectations,” he said.