Expect Lower Prices for Bigger 2012 Wheat Crop

March 4, 2012 08:13 PM
Expect Lower Prices for Bigger 2012 Wheat Crop


Wheat growers should expect bigger supplies, steady exports, and lower prices next year.

"The 2012-13 season-average farm price is projected at $6.30/bu., down $1 from the midpoint of the record-high projected range for 2011-12," said USDA analysts in a report to the 2012 Agricultural Outlook Forum.
USDA expects total domestic wheat plantings this year to hit 58 million acres, which would be the high since 59.2 million in 2009. Department analysts think the total plantings of wheat, corn, and soybeans will reach 227 million acres, the high since 1984.
"I thought the outlook conference reflected pretty accurately on the wheat situation," said commodity broker and wheat merchandiser Joe Christopher of Crossroads Coop Association, Sidney, Neb.
He expects spring wheat plantings to bounce back from last year, when millions of acres on the northern plains were too wet to plant.
Frayne Olson, marketing specialist at North Dakota State University, said planting prospects in his state look good after about a fourth of the total crop acreage was too wet to plant in 2011.
Last year, North Dakota wheat plantings plunged 1.73 million acres while U.S. wheat acreage fell only 816,000 acres.
Olson said he guesses this year's total North Dakota wheat planting will reach 8.3 million acres, up from 6.8 million last year but still below acreage in 2009 and 2010. He expects durum acreage to rebound to 1.2 million acres from 750,000 last year.

Bigger Crop in Northern Plains

Here's what USDA projected for 2012 wheat crops:
  • Production of hard red winter, durum, and other spring wheat likely will increase while soft red winter and white winter production will decrease. Expect higher acreage in the Dakotas and Montana and lower acreage in the eastern Corn Belt.
  • Projected total 2012 wheat output is up 8 percent from 2011 to 2.165 billion bushels on higher acreage and yields. Projected average yield for all wheat is up 0.8 bu. at 44.5 bu./acre, in line with trend yields.
  • Drought in the southern and central plains is expected to limit the ratio of harvested to planted acreage, even though winter precipitation has improved crop conditions in the southern and central Great Plains.
  • Total wheat supplies likely will rise 5% to 3.13 billion bushels for 2013, compared with the five-year average of 2.96 billion.

Expect More Feed Demand

Total wheat demand in 2012-13 may rise slightly, thanks mainly to feed demand, said USDA. Here are key points on demand:
  • Domestic food use likely will increase 10 million bushels on stable per capita flour consumption and population growth of less than 1 percent.
  • Feed and residual use is projected at 180 million bushels, up 35 million from this year, in response to the bigger crop and competitive prices relative to corn prices from June to August.
  • With world wheat output projected just below the 2011-12 record, exports likely will only hold steady from this year.

Stocks Up, Prices Down

Based on increased production and a small increase in demand, USDA projects ending stocks will grow to 957 million bushels, leaving a stocks-to-use ratio of 44 percent. USDA projects the 2012-13 season-average farm price for all wheat at $6.30/bu., down $1 from the midpoint of the range for 2011-12.
"Favorable opportunities for forward pricing are expected to underpin farm wheat prices as are strong corn prices, especially during the summer quarter of the June-May wheat marketing year when producers traditionally market nearly half of the crop," said USDA.
Northern Hemisphere wheat plantings are up, noted Crossroads Coop merchandiser Christopher. "We have had some weather challenges to some of those crops," he said, so low emergence and winterkill may reduce the expected acreage. "But you have the potential for a larger world wheat crop than you had last year," said Christopher. "The world has plenty of wheat."

'Market Wheat Early'

Olson has been telling growers to watch closely the condition of winter wheat in the southern plains in April and May. He's heard stories of farmers planting extra winter wheat in Kansas, Oklahoma, and Texas for grazing. Winterkill may not be heavy, but one market question will be how much of that wheat is replaced because of heavy grazing. "So we may see more hard red winter wheat abandonment," said Olson.
"Wheat growers will want to market wheat early in the crop year," said Christopher. "The weather market will kill it a couple of times. If corn supply and demand is as tight as it is for this year, there will be opportunities for feed wheat to move at fairly lucrative prices in some areas of the country."


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Spell Check

3/5/2012 02:26 PM

  projected, expects, likely, think, prospects, guesses. What a joke! I should become an analyst.

3/7/2012 04:38 AM

  And wheat prices are already $2 lower than they were one year ago. Funny how that little fact never gets any mention - just keep on playing that buyers game, forward contract, forward contract, forward contract ASAP! Then there will be NO doubt the cash price will be even lower next year.


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