<b>By ANN HINCH<br>
Assistant Editor</b> </p><p>

MINNEAPOLIS, Minn. — Last Friday, the USDA World Agricultural Outlook Board lowered its estimation of wheat ending stocks in the United States from 292 million bushels in January to 272 million, thanks to increased exports.<br>
The USDA reported this projection is the lowest ending stocks of U.S. wheat in 60 years. Export projections are up 25 million bushels over January, more than making up for a projected reduction of 5 million in feed and residual use. Worldwide, ending stocks are projected at just under 110 million metric tons, down slightly from January’s estimate, but at the lowest level in 30 years.<br>
On Friday, the CME Group reported the Chicago Board of Trade closed at $10.93 on March wheat, the Kansas City Board of Trade closed at $11.40 and the Minneapolis Grain Exchange (MGE) led them both at $15.53, closing 30 cents higher than the previous day, for a record wheat price to be traded on a U.S. exchange.
“We are in uncharted territory,” said Jim Bower of Bower Trading in Lafayette, Ind.<br>
He predicted if prices exceed and stay above $11, it should spur more planted wheat acreage worldwide.<br>
Corn and beans<br>

Though it’s only February, speculation is constant about what 2008 holds for corn and soybeans. The USDA’s global report offered little change between January and February ending-stocks projections for both, though it did lower its U.S. ending stocks estimate of soybeans by 15 million bushels, thanks to higher crush and exports.<br>
Bower noted projected domestic soybean oil stocks were up partly because high prices have started to slow its use in biodiesel production.<br>
“The (soybean) market is almost desperately seeking a price where all this can balance out,” he said.<br>
He reported scouts in Brazil have told him that country’s soybean numbers are “very good,” with projected yields of up to 45 bushels per acre and another 45 days to go for harvest, at which time they could be higher.<br>
Because of drought, Argentina is not doing as well, but Bower said the next five weeks are still critical to production and it could improve.<br>
What could happen<br>

Asked if a possible U.S. economic recession could affect the commodities market, Bower pointed out “the world will not run without food or energy.”<br>
He said continued higher prices will likely weigh on the middle class worldwide, though.<br>
“This is not a good thing to happen, in my opinion,” he said. “If you escalate prices in the outer-space levels … everybody remembers the 1996 situation where we spiked these prices and then, they went down.”<br>
While he likes seeing farmers fetch a higher price for what they produce, he doesn’t think such high commodity prices are good for their operations in the long-term, and believes food prices will be a key feature in this year’s political debates. He predicted escalating prices will put a hardship on the livestock and baking industries, as grain stocks are already “dangerously low.”<br>
High corn prices might also force removal of the tariff on Brazilian ethanol imports into the U.S., he said.<br>
Bower believes the USDA’s responsibility is to ensure a “safe, adequate and reliable supply” of food, not to guarantee high prices to farmers or a certain level of biofuel production.<br>
Moreover, he said farmers are not in a free-market situation, since federal mandates for increasing biofuel production – not consumers’ desire – are creating that demand.<br>
He added the USDA should instead be concerned with what will happen if there is a drought this summer; if that comes to pass, he said he could make a case for there being negative carryover of some grain stocks for 2009.<br>
One problem he cited with getting used to increasing commodities prices is if and when they start falling, grain and soybean farmers still have their input costs – cash rents, fertilizer and fuel, to name a few – which have increased along with (and, in part, because of) commodities market prices.<br>
Bower’s advice is for farmers to take advantage of their current income to cover as much of their foreseeable input costs as possible, even into 2009. He recalled high prices at the end of the 1980s that sparked cash rent increases in 1990. “When it started to come off and (commodities) prices started to come off, the farmer and rancher were devastated,” he said of those who did not budget early to cover their costs.<br>