Market Wheat Early

March 23, 2012 11:30 PM
Market Wheat Early

Wheat experts point to global supply increases, steady exports and lower prices

Commodity predictions seem rational enough when based on a couple of production factors. It’s all the in-between events that keep it interesting. Despite the unknowns, you have to start making marketing decisions.

The 2012/13 season-average farm wheat price is projected at $6.30 per bushel, down $1 from the projected average for 2011/12," said USDA analysts in a report to the 2012 Agricultural Outlook Forum in February.

USDA expects total domestic wheat plantings this year to hit 58 million acres, which would be the most since 59.2 million in 2009. Department analysts think total plantings of wheat, corn and soybeans will reach 227 million acres, the most since 1984.

"I thought the outlook conference reflected pretty accurately on the wheat situation," says Joe Christopher, commodity broker and wheat merchandiser for Crossroads Cooperative Association (CCA) in Sidney, Neb.

He expects spring wheat plantings to bounce back from this past year, when millions of acres on the Northern Plains were too wet to plant.

Production expectations. Here’s what USDA projects for 2012 wheat crops: Production of hard red winter, durum and other spring wheat will increase, while soft red winter and white winter wheat 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% from 2011 to 2.165 billion bushels on higher acreage and yields. Projected average yield for all wheat is up 0.8 bu. to nearly 44.5 bu. per acre, in line with trend yields.

Total wheat supplies will likely rise 5% to 3.13 billion bushels for 2013, compared with the five-year average of 2.96 billion. Total wheat demand in 2012/13 might rise slightly, thanks mainly to feed demand, USDA reports. Here are key points on demand:

  • Domestic food use will likely increase 10 million bushels on stable per capita flour consumption and population growth of less than 1%.
  • 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 will likely hold steady from this year.

Expect more feed demand. Based on increased domestic 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%.

"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 to May wheat marketing year when producers traditionally market nearly half of the crop," USDA said in the report.

Ready to sell. Frayne Olson, a marketing specialist at North Dakota State University, has been telling farmers to closely watch 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 might not be heavy, but one market question will be how much of that wheat is replaced because of heavy grazing.

"Wheat growers will want to market wheat early in the crop year," says CCA’s 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." He sums up the market outlook with some collective global market wisdom: "The world has plenty of wheat."

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