Ticker: W
Exchange: CBOT
Trading Hours: Regular Hours: 10:30 - 2:15 EST.
Electronic: 9:30p.m. - 7:00 a.m. EST
Contract Size: 5,000 Bushels
Contract Months: Jul, Sep, Dec, Mar, May
Price Quote: Cents and Quarters per cent/bu.
Tick Size: cent/bu. ($12.50/contract)
Last Trading Day: The business day prior to the
15th calendar day of the contract month
Daily Price Limit: 30 cents/bu ($1,500/contract) above or below the previous day's settlement price. No limit in the spot month (limits are lifted two business days before the spot month begins).

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Supply & Demand Tables Weekly Export Sales Grain Stocks
Crop Progress Supply & Demand Est. Prospective Plantings

Fundamental Overview:

Wheat is grown at different times of the year and different places within the U.S. Therefore, you have your choice of trading three different wheat contracts:

1. Chicago - is a soft red winter wheat. It is grown in the Southern Midwest in a variety of states including Missouri, Southern Illinois, Southern Indiana, Kentucky, Tennessee and Arkansas. It is the lowest quality of the different. It is the grade of wheat most often used for animal feed. It is most often exported to Third World countries because of its low price.

2. Kansas City - is hard red winter wheat. Winter wheat is planted in the fall. It germinates in the fall and then goes into dormancy through the winter. In the spring it comes out of dormancy, grows like wild and starts to be harvested in late May. It is grown in Texas, Oklahoma, Kansas, Colorado and Southern Nebraska. Hard red winter wheat is the largest of the US wheat crops. It is a medium grade wheat. It is most often used for bread and pizza dough. It is the most popular export variety. Soft winter wheat and hard winter wheat combine to be 75% of all the wheat grown in the US.

3. Minneapolis - is spring wheat. It is planted in the spring and harvested in the fall. It is the highest grade wheat of all the varieties. It is prized by pastry chefs and is almost never sold for export. It is principally grown in the Dakotas, Montana and Minnesota.

The wheat traded on these three different exchanges obviously differ in quality. The higher qualities will normally trade at a premium to the lower quality. Chicago wheat normally trades at the lowest price and exports tend to play a big role.

Key Trading Notes:
Plantings: Look for USDA estimates of planted acres and weather during plantings. Too much moisture (rain) can delay the farmers from getting crops planted in time. In general, if crops get planted too late, the growing cycle is shortened and yields are lower.

Volatility: Weather tends to be a main factory for volatility in wheat. Wheat also competes with other grain for demand, especially for animal feed. Prices of other grain will also influence the price of wheat. Wheat also has to deal with adverse weather during the whole year.

Weather: Winter wheat needs a nice covering of snow to keep it insulated during the winter months. It is also important to watch moisture levels and diseases that can develop from too much rain. Freezes or threats of freezes can send the price of wheat higher.

Key Reports:

  • Planting Intentions
  • - Usually released around the end of March. This gives an indication of how much and which crops the farmers expect to plant for the upcoming season. Fewer acres than expected can be bullish for that particular crop.

  • Monthly Crop Production
  • - The USDA releases a monthly update on estimates for supply and demand of crops. These reports can cause extreme movements in prices, especially during the summer months.

  • Weekly Crop Progress
  • - These reports give an indication of the current development of crops. Also compares to crop conditions in previous years to use as a benchmark. If crops are behind schedule in developing, they have a lower than normal yield and vice versa.

  • Weekly Exports
  • - A good summary of the demand from foreign countries on a weekly basis.

  • Grain Stocks
  • - The USDA provides information on the current supply of grain stocks in the U.S. and the world.

Top 5 States for Production:

Kansas 17.6 %
North Dakota 12.9 %
Oklahoma 6.7 %
Washington 6.7 %
Montana 6.2 %

Wheat Outlook
February 12, 2004
Provided by USDA

Projected U.S. 2003/04 ending stocks of wheat are down 25 million bushels from last month due to increased exports. Projected exports are 25 million bushels above last month because of increased world import demand and higher-than-expected sales and shipments to date. Both hard red winter (HRW) wheat and soft red winter (SRW) wheat exports increase 10 million bushels while White wheat exports rise by 5 million bushels. The projected range of 2003/04 wheat prices is narrowed 5 cents on each end to $3.30 to $3.40 per bushel.

U.S. 2003/04 wheat exports are forecast up 1 million tons this month to 32 million tons (the June-May local marketing year is up 25 million bushels to 1.15 billion bushels). An increase in world wheat trade and the strong pace of U.S. sales and shipments support the forecast. Forecast global imports are up more than 1 million tons this month, with increases for Romania, Morocco, Turkey, Syria, and some other countries. World wheat production projected for 2003/04 was reduced less than 1 million tons this month, but global consumption increased, dropping ending stocks by more than 1 million to less than 126 million tons, the lowest since 1981/82.

Domestic Outlook
U.S. Exports Are Raised
Projected U.S. wheat exports for the 2003/04 marketing year are up 25 million bushels month-tomonth to 1,150 million bushels because of increased world demand and the export pace to date. The projected exports of HRW wheat and SRW wheat were raised by 10 million bushels each. White wheat exports were raised by 5 million bushels. The projected 2003/04 exports are 296 million bushels above the very low exports of the 2002/03 marketing year. The 854 million bushels exported in 2002/03 were the lowest U.S. wheat exports since 1971/72. The projected 2003/04 exports are the highest since 1995/96.

Minor Class Changes to U.S. Imports
Projected U.S. wheat imports are unchanged from last month. However, minor changes were made to four of the five classes of wheat based on pace to date. Imports of SRW and white were raised 2 million bushels and 1 million bushels, respectively. Offsetting these increases were decreases to HRW and durum of 1 million bushels and 2 million bushels, respectively. Hard red spring (HRS) wheat exports were unchanged from last month.

Ending Stocks Down From Last Month, but Still Higher Than a Year Ago
While projected 2003/04 ending stocks are down 25 million bushels month-to-month, these stocks are 43 million bushels above the 2002/03 ending stocks of 491 million bushels. Except for durum ending stocks, the projected 2003/04 ending stocks of the other classes are higher than 2002/03 ending stocks. The projected 2003/04 ending stocks are 26 million bushels, 2 million bushels less than their 2002/03 ending stocks. The last time durum stocks were this small was in 1997/98.

Early 2004 Crop Conditions Are MixedCompared With a Year Ago
Crop conditions for the 2004 winter wheat crop are reported by several State Agricultural Statistics Services for February. The 2004 conditions for Texas and Oklahoma are markedly worse than a year ago.

For Texas, 60 percent of the 2004 crop was rated poor to very poor on February 1, 2004. Eleven percent of the 2004 Texas crop rated good to excellent. The February crop conditions a year ago at this date were 13 percent poor to very poor and 60 percent good to excellent. Similarly for Oklahoma, this year 30 percent of the wheat crop rated poor to very poor and 40 percent rated good to excellent, while a year ago only 5 percent rated poor to very poor and 68 percent rated good to excellent.

Crop conditions in Kansas were only slightly worse than a year ago, with 27 percent of the 2004 crop rated poor to very poor compared with 22 percent for the 2003 crop. This year, 42 percent of the crop rated good to excellent compared with 39 percent for last year's crop.

Nebraska's crop conditions for 2004 are slightly better than a year ago as 31 percent of the crop is rated good to excellent compared with 23 percent for 2003 at this time of the year. This year, 28 percent of the crop rated poor to very poor, while 29 percent of last year's crop received these ratings.

Montana's 2004 crop conditions were also slightly better than a year ago as 36 percent of the crop is rated good to excellent compared with 30 percent for 2003. This year, 18 percent of the crop rated poor to very poor, while 28 percent of the 2003 crop received these ratings.

International Outlook
World Wheat Production in 2003/04 Reduced Slightly This Month
World wheat production in 2003/04 is forecast at 552 million tons, down almost 1 million tons this month. Increases for Argentina, Brazil, and some other countries were more than offset by reductions for China, Ukraine, Turkey, and the European Union (EU).

In Argentina and Brazil the 2003/04 wheat harvests are now virtually over, and more complete information boosted production estimates. In Argentina, yields in late-harvesting southeastern Buenos Aires province were better than expected, boosting production 1 million tons to 13.5 million. Wheat production in Brazil increased 0.3 million tons to 5.5 million.

China's 2003/04 wheat production estimate was reduced 1 million tons to 86 million based on the latest information from official sources in China. Area declined more than previously forecast, down 8 percent compared with the previous year. The declining trend is persistent, with winter wheat area for 2004/05 also reported down.

Ukraine's disastrous 2003/04 wheat production was reduced 0.4 million tons to only 3.6 million based on harvest data released by the State Statistical Committee. Winter kill and drought resulted in an amazing drop in wheat production from 20.6 million the previous year.

Turkey's 2003/04 wheat crop was reduced 0.4 million tons to 16.8 million based on information from the Foreign Agricultural Service in Turkey. Yields were reduced and production is estimated to be virtually unchanged from the previous year.

EU 2003/04 wheat production was reduced 0.3 million tons to 90.7 million, mostly because of more complete information for Italy and France.

Projected 2003/04 Global Ending Stocks Drop More Than 1 Million Tons
Forecast world wheat use was nearly unchanged this month at 590.7 million tons, with small changes offsetting each other. However, apparent global wheat disappearance increased this month because local marketing year exports were increased by more than local marketing year imports. Trade is forecast both on an international marketing year, July-June, and on each countries' local marketing year. For example, 2003/04 starts with India harvesting in March 2003 and ends with Argentina in December. This makes the India 2003/04 local marketing year March-April, while Argentina is December-November. On the global level, the July-June international marketing year trade balances, with world imports and exports equal. However, when summing local marketing years, as published in the World Agricultural Supply and Demand Estimates, that is not the case. This month, with significant changes to South America, local marketing year exports increased 2.3 million tons while imports only increased 1.2 million. This boosted apparent global wheat disappearance.

The combination of reduced 2003/04 production and increased apparent global disappearance dropped world wheat ending stocks 1.3 million tons this month to 126 million, the lowest since 1981/82. Most of the decline was in China, down 1.5 million tons because of reduced production and increased exports.

Increasing World Wheat Trade Boosts U.S. Export Prospects
Projected 2003/04 world wheat trade (July-June) was increased 1.1 million tons this month to 100.6 million. Import forecasts were increased 0.5 million each for Morocco and Romania because the pace of recent purchases has been stronger than expected. Morocco had a very good crop in 2003, but dryness in southern producing areas has cast a shadow over 2004 prospects, leading to an increase in purchases. Romania, on the other hand, had a very poor crop in 2003, and was expected to import, but has purchased even more than expected. Turkey, Venezuela, and Chile have each imported slightly more than expected, boosting import forecasts by a combined 0.5 million tons. However, Israel's expected wheat imports were reduced because they are buying feed grains instead of wheat for feeding.

Competition between exporters shifted several 2003/04 forecasts. Australia's July-June exports were reduced 1 million tons this month to 14 million, and Kazakhstan's export forecast declined 0.5 million to 6 million, because of the slower-than-expected pace of sales and shipments. However, China and Brazil, traditionally wheat importers, each had wheat exports increased 0.5 million tons this month. As calendar year 2003 ended, China exported a large volume of wheat because the grain export regulations were expected to change in 2004. As old wheat stocks have been liquidated in China, it has been profitable to export low-quality wheat especially to the Philippines for feeding. In Brazil, a large harvest and millers' preference for imported wheat, have resulted in higher returns for producer cooperatives exporting wheat.

With competitors' exports a mixed bag of reductions and increases, the United States is expected to capture most of this month's increase in world wheat trade. U.S. 2003/04 wheat exports are forecast up 1 million tons this month to 32 million tons (the June-May local marketing year is up 25 million bushels to 1.15 billion bushels). The strong pace of U.S. sales and shipments supports the forecast. According to Census data, U.S. wheat grain exports for July through December reached 15.9 million tons, up from 12.8 million a year earlier. Inspections data indicate January 2004 wheat exports reached 3 million tons, up dramatically from 1.5 million a year ago. Moreover, as of January 29, 2004, outstanding export sales reached 6.5 million tons, up from 3.5 million the previous year.

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