Wheat ending stocks took a dive late in the marketing year

You can look at the ending stocks for wheat by quarter from the USDA database to judge the direction in wheat prices. Because the ending stocks are very seasonal, the first quarter pf the marketing year which represents the harvest will show high stocks. These levels will decline as wheat is used. The final balances for the marketing year reflect the ending stock levels.

The stock values follow a similar pattern of decline across the marketing year; however, 2007 data shows that the first quarter did not have a significant decline but the expected decrease in the ending balance is large. This was reflected in prices during the year. The first five months of the year showed almost no change. It was only in the last few months that the market realized that the ending stocks would decline significantly and prices started to take-off.

Using the ending stock changes can provide a good indication of the direction in wheat prices. When stocks are higher than 3-year averages, there is usually a decline in price. When stocks are lower than average there is a corresponding increase in prices.