Analysts are hopeful that wheat prices could stay in the $7 to $8 range in 2014.
This year’s harvest is in the books. Wheat farmers survived a round of volatile market prices and unique production challenges. Here are five questions to ponder as we look ahead to the 2014 season.
1 What are wheat breeders working on? The short answer is, pretty much everything. From durable resistance to multiple diseases at Michigan State University, to intensive wheat stem sawfly studies at Montana State University, breeders are after a better set of varieties for farmers.
"To use a baseball analogy, we’re basically trying to build the MVP from an all-star team—one variety that has all the needed traits to be successful," says Washington State University
winter wheat breeder Arron Carter.
2 Does that include biotech wheat? Biotech wheat is a hot topic in the industry, but specific plans for a commercial launch remain elusive. The National Association of Wheat Growers (NAWG) recently issued a statement that notes while biotech wheat is not currently available, both NAWG and the U.S. Wheat Growers support innovation, research and the responsible introduction of new varieties. This includes biotech wheat.
Further, all three winners of the 2013 World Food Prize—Marc Van Montagu, Mary-Dell Chilton and
Robert Fraley—are engaged in biotechnology research. The pressure to produce more and more food for a growing global population will con-tinue to drive scientific advancements in biotechnology, the recipients say.
3 Is the supercycle over? Commodity prices rose an average of 9.5% per year from 2002 to 2012, according to the Worldwatch Institute. But the institute is reporting that so-called "supercycle" might be coming to an end. Now, the group is investigating if the commodities market has permanently cooled, is dramatically reversing or resuming its previous pace.
"The slowdown in commodity price growth in 2012 was indeed notable, but it is still not clear if the supercycle is completely over," explains Mark Konold, Worldwatch’s Caribbean program manager.
4 What are some of the key countries to monitor? According to Texas A&M Extension economist Mark Welch, delayed fall planting in the former Soviet Union has every analyst watching that part of the world. In Russia, the nation’s Grain Union estimated winter wheat plantings could be down 3 million hectares or more. In the Ukraine, the national weather service predicted planting could be down by as much as 30%.
"What happens there really does drive the world market," he says.
5 Will 2014 bring a bull or a bear? Analysts agree—it could still go either way, but they’re optimistic.
"It’s the most positive of all of the commodities," says Bob Utterback, Farm Journal economist. "On balance, it’s a decent year—not bearish or bullish. A wheat/soybean double crop could be the best operation next year."
Welch points to the demand side as a reason for his optimism.
"We’re still projecting wheat consumption to be at all-time highs," he says. "Given that, these markets are vulnerable to any supply disruption."
Welch notes that wheat and corn futures are still relatively correlative. That means $4.50 corn will support wheat around $7 to $7.50. Utterback says any estimate between $7 and $8 sounds reasonable.
You can e-mail Ben Potter at email@example.com.
- Mid-November 2013