Update: An earlier version of this story incorrectly identified Dr. Kim Anderson as an Extension agricultural economist at the University of Oklahoma, not Oklahoma State University.
Analysts expect an even greater global wheat glut in 2017 to drive down prices and whittle away at acreage.
Pushing down prices are three consecutive years of world wheat production and carryout. USDA estimates a third record global wheat harvest of 751.26 MMT in 2016-17, which will send carryover to a record 252.14 MMT.
“The perceived oversupply of wheat continues to weigh on the market. Record high global supplies coupled with the ideas of a record crop coming out of Australia will keep a lid on prices in the short-term,” predicts Angie Setzer, vice president of grain at Citizens Elevator in Charlotte, Mich.
Producers, struggling with relentlessly low wheat prices, are looking at switching acres to soybeans and other more profitable crops.
“A lot of farmers are moving away from wheat and going to soybeans, corn and lots of milo,” custom harvester Greg Thurman, of Kiowa, Kan., told Farm Net News, in Grand Forks, N.D. "We’re getting big into canola again. We tripled canola acres compared to what we have been doing,” addsThurman, who is also vice president of U.S. Custom Harvesters.
Although there is optimism about the winter wheat crop conditions, many farmers in western Kansas are switching acres from wheat to other crops, according to Thurman.
Analysts project that producers under pressure from low prices will plant less wheat for the second year in a row.
“The expectation is that we will see a significant reduction in winter wheat acres, and likely a reduction in spring wheat as well a current price relationships,” says Arlan Suderman, chief commodities economist, INTL FCStone in Kansas City, Mo.
Overall wheat acres could decrease by 7% to 10%, although in some areas they may actually increase, Suderman notes, including Oklahoma and surrounding Southern Plains states. Those expectations would be in line with USDA projections for wheat plantings of 50.2 million acres and harvesting of 43.9 million acres in 2016-17, down from 55 million planted acres and 47.3 harvested acres estimated for 2015-16
One potential bright spot for the wheat market is an increase in exports. USDA is projecting exports of 975 million bushels for 2016-17. That would be 200 million more bushels than the 775 million bushels in exports estimated for 2015-16, or a 26% increase.
However, a large chunk of relatively low test weight and/or protein crop could result in significantly lower prices, especially with HRW wheat, cautions Kim Anderson, an Extension agricultural economist at Oklahoma State University. It doesn’t cost much to store wheat and wait for higher prices, notes Anderson, but prices are projected to head lower.
USDA estimates a third year of back-to-back falling prices, with the average wheat farm price for 2016-17 at $3.60 to $3.80 per bushel. That would be lower than the estimated 2015-16 farm price of $4.89, and roughly 60% less than the 2014-15 price of $5.99.
There is always China to consider, analysts note. That's because China holds an estimated 44% of the world’s wheat. And that means “actual global supplies remain somewhat of a wild card,” according to Setzer.
"Any type of reduction in projected Chinese supplies coupled with any type of North American production scare could send wheat soaring higher,” she says.
However, with a decrease in fall acres and early conditions in many areas questionable, wheat production could drop significantly as the market moves ahead and perhaps attracts buyers attention, she says.
The editors at AgWeb.com are taking a look at experts’ projections for a variety of commodities in 2017 to help you succeed and be profitable in the coming year. Tune in periodically over the next six weeks as we add outlooks for corn, wheat, cotton, cattle, machinery and more. Read all the outlook pieces here.