Wheat Outlook. Wheat futures prices have staged a long over-due rally since establishing a low back at the end of April. December delivery soft red wheat futures have moved from their contract low of $2.83 per bushel on April 29^th to a recent high of $4.40 per bushel on September 9^th. Wheat futures have led the entire grain futures complex higher during late summer and into the early fall. Markets have focused on the tight supply - demand balance here in the U.S. and world markets and have moved higher to ration out the available supplies.

The current U.S. supply balance based on the August USDA crop production reports indicates production this year will fall well short of projected use. Thus ending stocks will be drawn down to the lowest levels since 1996, the last time we had good wheat prices.

U.S. production this year was pegged at 1.69 BB, down about 15% from the nearly 2 BB harvested last year. Use will need to be reduced and that will likely come from the export market. Total use will be about 2 BB, down about 8% from the 2.16 BB used last year.

Ending stocks will be about 460 MB, down from 772 last year. More importantly, the stocks-to-use ratio will fall to 22.3%. That points to higher prices. The current USDA estimate of season average prices is near $3.50 per bushel. Current futures are well above that level indicating good pricing opportunities unless there is further deterioration in the spring crop yet to be harvested.

Those wheat growers that sold their wheat at harvest and purchased call options have seen a nice gain from that strategy. They should consider selling out those calls on this rally and pocketing their profits.

The high prices also provide wheat growers will a good opportunity to begin a forward pricing program on next year's production. Under the new Farm Bill, Georgia growers find a lower loan rate than in previous years meaning they have greater downside market risk to contend with. They should use this rally to price a portion of their anticipated production.(George Shumaker)

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