In most years, U.S. wheat export shipments decline seasonally during the winter, spring, and summer months. Historically Low U.S. and Global Wheat Stocks

Global stocks are projected to drop to a 30-year low by July 2008, following seven out of eight years in which global consumption exceeded production ( Figure 2 ). In addition, in January USDA released an estimate for last fall's plantings of the winter wheat crop that, although up from last year, was significantly below market expectations. On FebruaryÂ 25, 2008, the nearby futures contract for HRS wheat closed at a record $24 per bushel. Prices for soft white wheat (grown primarily in the Pacific Northwest) have also risen sharply in recent months. Wheat prices must rise high enough to compete for planted acres this spring (2008) with the other grains and oilseeds. As a result, assuming normal weather and average yields, U.S. wheat production is expected to rise by nearly 13%. Larger global wheat supplies are expected to significantly reduce international demand for U.S. wheat in the latter half of 2008. Markets are likely to exhibit substantial price variability until global stock levels can be rebuilt. Long-Term Outlook 10

As the global supply rebounds from the shortfalls of 2007, higher projected production is expected to facilitate the rebuilding of stocks and the return of prices to the $4 to $5 per bushel range over the next five- to ten-year period. USDA predicts that food price inflation for 2008 will be in the range of 3% to 4%, while bakery goods are expected to rise by 5.5% to 6.5%.
The U.S. Department of Agriculture (USDA) projects the U.S. season-average farm price (SAFP) received for all wheat in the 2007/08 marketing year (June to May) to be in the $6.45 to $6.85 per bushel range. The range midpoint exceeds the previous U.S. record of $4.55 (in 1995/96) by 46%. During the past 30 years, the all-wheat SAFP has stayed within a range of $2.42 to $4.55, while averaging $3.33 per bushel. USDA projects a replenishment of U.S. and global supplies in 2008 (assuming normal weather conditions) to moderate market prices in the latter half of 2008. However, prices are likely to exhibit substantial variability until global stock levels can be rebuilt.
The initial impetus for rising prices over the past year has been a 30-year low in global stocks following seven out of eight years in which global consumption exceeded production. However, in recent months several other factorsâincluding reluctance of traditional exporters to make further supplies available to international markets, strong international demand, the rapid growth in the demand for grains and oilseeds as feedstock for biofuels production, and USDA's announcement that last fall's winter-wheat plantings were less than expectedâhave contributed to a sharp rise in cash and futures contract prices, particularly for higher-protein wheat varieties. This report will be updated as events warrant.