The amount of wheat in storage across the U.S. is lower new than it was at the same time last year, according to the USDA.
Wheat stored nationally totaled 590 million bushels, down 17.8 percent from 718 million bushels last year, USDA’s National Agricultural Statistics Service reported.
Dan Steiner, senior grains merchandiser for Pendleton Grain Growers in Pendleton, Ore., said it’s not surprising that stocks are tight. He believes soft white wheat stocks have been overstated, reported by USDA at 49 million bushels but actually roughly 40 million bushels. Soft white wheat is the dominant type of wheat grown in the Pacific Northwest.
According to NASS:
• Wheat stored in Idaho totals 13.4 million bushels, down 5 percent from 14.1 million bushels at the same time in 2013.
• Oregon wheat stored totals 6.42 million bushels, down 40 percent from 10.8 million bushels in 2013.
• Washington totals 31.2 million bushels, down 5.7 percent from 33.1 million bushels in 2013.
Basis levels — the difference between Portland soft white wheat cash prices and Chicago Board of Trade prices — have been very strong, with Portland prices roughly $1.30 to $1.35 higher than Chicago for July, August and September.
“That’s an indication that not only are we seeing tight soft white stocks, but there’s very little movement,” Steiner said, noting that the crop’s harvest prospects are lower due to dry conditions. “What you’re seeing is soft white wheat trade at a relatively strong premium.”
Steiner expects the premium to continue all year long, especially as soft red wheat stocks experience quality problems, decreasing their value on the Chicago market even further. Soft white prices will follow Chicago prices lower, but the core business that relies on soft white wheat will keep it steady, Steiner said. Soft red wheat is getting low enough to be competitive on gross prices to compete on the world market.
Speculators have oversold the market, driving down prices, and will eventually push back the other way, but likely after harvest, Steiner said.