Low wheat stocks could set the stage for higher prices if weather hampers yield.
USDA’s February World Agricultural Supply and Demand Estimates (WASDE) report revealed basically bullish corn and neutral soybeans and wheat, says Oklahoma State University Extension agricultural economist Kim Anderson.
Soybeans and wheat just can’t let corn take any of the crop acres. Some analysts predict that the price battle for crop acres will go through March and into April. Once producers have corn, soybeans and spring wheat planted, the land price war will be over until the 2012 crop, Anderson adds.
The factors supporting wheat prices are competition for cropland; cold, dry conditions in Western parts of the hard red winter wheat area; massive snow in Canada that may delay or prohibit spring tillage and planting; and countries buying wheat to insure against a food shortage. Within the next few months, most of these factors may be null events. If that happens, wheat prices could easily decline by $2 per bushel.
If U.S. wheat production is below 2.05 billion bushels this year and world production is below 23.5 billion bushels, prices are expected to remain near current levels. Wheat ending stocks are sufficiently low that world production below 22 billion bushels and U.S. production below 1.9 billion bushels could result in prices reaching spring 2008 levels. "Of course, a large crop could result in Kansas City Board of Trade wheat prices falling below $6," Anderson says.
Markets React to Spring Weather
Big swings in corn and soybean prices made the first week in March another wild week in the grain markets. These swings gave volatility a whole new meaning and are putting pressure on acreage decisions, says Jerry Gulke, president of the Gulke Group.
With planting season right around the corner, the acreage battle is intensifying.
Premium wheat is in short supply, Gulke says. "The market is looking for good protein wheat and there is hardly any around."
This shortage of good-quality wheat is helping push wheat prices up and make farmers consider it as another option. "We’re seeing wheat come back big-time," he says. "Suddenly, wheat is competing with corn and soybeans."
The key now, Gulke says, is whether we’re going to get the crop in the ground. And it does not look like this year will be an early spring.
Gulke says a lot of weather forecasters are saying that with La Niña still lingering, the odds of getting a less-than-average crop this year for U.S. corn is approaching 70%. "It’s not 50/50 anymore," he says. "It’s going to boil down to weather again."
Environmental Risk Insurance
Recognizing that there are environmental risks in farming that are not typically addressed by standard insurance programs, the National Association of Wheat Growers (NAWG) is partnering with Intercorp Inc., a veteran insurance program management firm, to offer environmental insurance coverage for wheat farmers.
Most farms have a coverage gap in their property and liability insurance coverage created by the absolute pollution exclusion, according to Intercorp. Due to this exclusion, standard property and liability insurance policies don’t cover claims associated with pollution incidents, such as fertilizer and pesticide clean-up costs or the accidental release of fuel or chemicals into the soil from an above-ground storage tank.
The new program offers coverage for on-site and off-site cleanup, third-party liability for bodily injury and property damage for pollution conditions, legal defense costs and coverage for aboveground storage tanks.
In addition, growers will receive a self-administered environmental assessment designed to pinpoint how they are managing environmental exposures and to recommend improved practices.
Wheat growers should contact their local insurance agent for placement of the coverage through Intercorp. For more information, contact Stephen Arnold at (800) 640-7601 or visit www.intercorpinc.net/environmental-insurance/environmental-coverage-agricultural-risks.
NAWG, USW Outline Trade Priorities for House Committee
The National Association of Wheat Growers (NAWG) and U.S. Wheat Associates (USW) urged U.S. trade officials and congressional leaders to finalize pending free trade agreements with Colombia, Panama and South Korea in a hearing earlier this year. The groups called on the Obama administration to send trade legislation to Congress for immediate ratification.
The groups said trade is critical to the export-dependent U.S. wheat industry, which typically sees half of annual production sent overseas.
In the 2009/10 marketing year, the U.S. exported roughly 40% of production, accounting for nearly 18% of all global wheat exports.
NAWG and USW told legislatures that the ability to compete on a fair and level playing field with other wheat-exporting countries is essential to the economic well-being of U.S. wheat producers and to continue a positive agriculture trade balance.
They also noted that ratification of the agreement with Colombia is a top priority as $100 million in sales and extensive market share are at risk as the process drags on. Econometric analysis reports U.S. producers would have gained 10¢ per bushel (farmgate price) if the Colombia agreement had been implemented ahead of similar measures negotiated with Argentina and Canada.
U.S. Trade Representative Ron Kirk confirmed at the hearing that the administration expected to send the Korea free trade agreement to Congress in the coming weeks, but was more guarded about the agreements with Colombia and Panama.
USDA–ARS Examines Climate Change Effects on Wheat
|This experiment shows the effects of turning up the heat on wheat. The three lightly shaded strips of wheat in the center were planted in September 2008 and were each divided into three plots: a heated plot with a heating apparatus (shown as a white panel), and reference and control plots where no heat was applied. Wheat in the heated plots, shown as circular patches near each heater, grew faster and matured earlier than controls. The dark-green plots on the sides were planted at other times in 2008 and 2009.
Wheat growers in the Southwest have a better idea about how to adjust to climate change in the decades ahead, thanks to USDA scientists in Arizona.
Researchers with the USDA–Agricultural Research Service (ARS) installed infrared heaters in wheat research fields at the agency’s Arid-Land Agricultural Research Center in Maricopa, Ariz., to simulate crop growing conditions expected by 2050.
The scientists planted wheat every six weeks between March of 2007 and May of 2009 and applied heat to six of 15 plantings, warming the crops planted each year in March, September and December.
They measured canopy conditions to ensure daytime temperatures in the heated plots rose by 2.7°F and nighttime temperatures rose by 5°F to 6°F.
Infrared heaters were suspended above the plants, using a system known as a Temperature Free-Air Controlled Enhancement (T-FACE) apparatus. Developed by retired USDA–ARS soil scientist Bruce Kimball, T-FACE enables scientists to raise the temperature of experimental crops in open fields.
As expected, the heaters accelerated crop growth, increased soil temperatures, reduced soil moisture, induced mild water stress on the crops and had a nominal effect on photosynthesis.
But the effect on yield depended on when the wheat was planted.
When heat was applied to wheat fields that were planted in mid-winter, the crop grew faster—nearly a week ahead—than unheated fields, but there were no major differences in harvested yield.
However, adding heat to wheat that was planted in September enabled the wheat to survive hard frosts between Christmas and New Year’s, both years with only moderate yield loss. Wheat that was planted at the same time in the unheated plots yielded nothing.
The results will be published in Global Change Biology to provide guidance to growers on how to adjust planting and other crop management schedules as the climate warms. They also show the effectiveness of the T-FACE system for investigating future climate change impacts on U.S. crops.
- Early Spring 2011