GAO Analysis of Durum Wheat Prices

GAO discussed the current market conditions for durum wheat, focusing on whether durum prices were consistent with supply and demand conditions. GAO found that: (1) price levels had a strong inverse relationship to stocks on hand at the end of the year, so that when stock levels were high, the average annual price was low; (2) for 13 of the 16 years from 1973 to 1988, more than 50 percent of total durum wheat stocks remained at the end of the year; (3) large ending stocks indicated that supply was well above expected demand and the ratio represented barometer on wheat prices; (4) because the Department of Agriculture forecast implied a 43-percent stocks-to-use ratio for 1990, wheat prices could range from $5.25 to $6.28 per bushel; (5) lower exports would make the stocks-to-use ratio higher and lower the market price; and (6) although such factors as grain quality, import levels, and export forecasts can affect wheat prices, this year's price may indicate a fundamental change in the market for durum wheat.