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More Wheat Acres Planted for Cash Flow

February 11, 2012
By: Fran Howard, AgWeb.com Contributing Writer
pWH4 More Wheat Acres Planted for Cash Flow
Winter wheat seedings are up despite the effects of a severe drought.  
 
 

Global stocks, however, are already full

Despite the worst single-year drought ever in the Southern Plains—which has yet to show significant signs of letting up—wheat producers are hoping for, or perhaps even banking on, more rain.

Winter wheat plantings increased 3% from a year ago for a total of 41.9 million acres. Of that acreage, hard red winter wheat plantings are up 6% to 30.1 million acres, according to USDA’s Winter Wheat Seedings report.

Farmers throughout the U.S. increased seeded acreage in all but a few states. Some of the biggest increases in winter wheat came in Kansas and Oklahoma (up 8%), Texas (up 11%) and New Mexico (up 6%), where drought has been most severe.

"A lot of growers were in a very dry situation coming out of last year’s crop," says Dan O’Brien, agricultural economist at Northwest Research Extension Center in Colby, Kan.

"Many didn’t get a good spring wheat crop, and if they were able to get a winter crop in—and if they have moisture to get the crop through the winter—it will be better than waiting until spring for that wheat harvest to bring in income," O’Brien says.

Grain or forage? Timely fall rains allowed farmers in the Southern Plains to get wheat seeded, but analysts expect a fair share of the winter wheat crop in Texas, New Mexico, Oklahoma and parts of Kansas to be used for grazing livestock. They say harvested acreage will depend entirely on any additional moisture received during the next few months. Some cow–calf operators hope to graze their herds on winter wheat stands prior to the crop entering into its reproductive cycle.

This means wheat prices no longer reflect human consumption. "Wheat has been forced to price more like a feed," says Tim Emslie, research manager for Country Hedging in St. Paul, Minn.

"The basis in Salina, Kan., is the strongest since 2007," O’Brien says. "You’d expect a narrow basis to be a good indicator of strong usage, but exports are so-so at best."

Supplies of high-protein wheat are still relatively tight in the U.S., causing issues for some millers, but exports are softer than they were a year ago, O’Brien notes. That could change, however, if problems persist in the Black Sea Region, where drought has also taken hold.

Some analysts expect Ukraine’s winter wheat production will drop to 12 million metric tons (mmt), down from 16 mmt in 2011, and yield to be reduced by 40%. A reduction that deep could reduce Ukraine’s exports to the Middle East and North Africa, leaving Ukraine with only enough wheat to meet local consumption.

However, says Casey Chumrau, market analyst for U.S. Wheat, with Black Sea winter wheat still dormant, it’s premature to say yield losses will be that severe. Ukraine growers won’t be harvesting wheat for a few months, which allows time for improved precipitation patterns.

World stocks piling up. "World stocks are building," Emslie says. "That’s what happens when
everyone has a decent crop."

The 2011–12 marketing year saw large crops in Canada, the U.S. Northern Plains and western Australia. "Based on world fundamentals, if everyone has good crops this year, we’ll see lower wheat prices," Emslie says. "If Ukraine and Russia have better than expected crops, the U.S. farmer will be punished for planting wheat." He expects 2012 wheat prices to average near $6.25, compared with prices closer to $6.05 today.

USDA increased global ending stocks of wheat by 1.5 mmt, for a total of 210 mmt.

O’Brien cautions that two years ago, when everyone was sure wheat prices were going to be abysmal, prices soared when it became apparent that the Black Sea Region was facing dramatic production losses. "But absent a supply shock in 2012, we have had enough buildup in stocks that they are almost burdensome," he adds.

Read more wheat news.


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FEATURED IN: Farm Journal - Mid-February 2012
RELATED TOPICS: Wheat, Crops

 
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