Wheat Mixed Optimism

January 25, 2013 07:21 PM
Wheat Mixed Optimism

by Nate Birt & Ben Potter

A bright future, but short-term market, weather worries remain

In terms of research dollars and effort, wheat tends to take a backseat to the corn and soybean crops. But two recent research and development efforts hope to change that.

First, a multinational group of scientists took the once hopelessly complex wheat genome, which has 17 billion separate DNA bases, and finally built a workable genome map.

"Essentially, we put together the world’s largest jigsaw puzzle," says Shahryar Kianian, North Dakota State University professor of plant sciences and one of the project’s collaborators.

"I hope wheat producers have wrapped their mind around early pricing opportunities for 2013 delivery"

The next lesson. Another collaborator, Bikram Gill, distinguished professor of plant pathology and director of the Wheat Genetics Resource Center (WGRC) at Kansas State University, says the next step is to develop a "gold standard sequence" for wheat. Scientists will anchor the complete sequence to a genetic map of agronomic traits important to the wheat industry.

Researchers at WGRC and elsewhere are also studying wheat’s polyploid properties, which could lead to breakthroughs in other food crops.

"Polyploidy has provided the evolutionary novelty that made wheat the world’s most important crop, but at the same time it made the genome more complex and a hard nut to crack," Gill says.

Gill says his focus is still on the true prize: the gold standard sequencing. Fortunately, the genome sequencing success has proved itself a catalyst for generating additional research and  development interest for wheat.

Collaboration at its best. In November, representatives from 16 countries and international organizations agreed to launch an initiative to increase wheat’s genetic yield potential by 50% in the next 20 years. The initiative, the Wheat Yield Network (WYN), will be bolstered by a $50  million to $75 million investment from the project’s partners during the next five years.

The network will bring together governmental and nongovernmental entities to support basic and applied wheat research. A key focus of WYN will be to look at ways to boost wheat yields through improvements to the plant’s fundamental processes, including photosynthesis.

"The Wheat Yield Network will aim to improve the yield potential of wheat by improving the physiology of the wheat plant itself, then combining those improvements with all other breeding objectives across governments and institutions," says David Marshall, the acting national program leader for USDA’s Agricultural Research Service and the U.S. government representative to WYN.

These developments have inspired much optimism about the long-term viability and profitability of growing wheat. But the short-term view is a bit more cautious.

Money and Mother Nature. "Wheat direction will be heavily influenced by trends in the corn market," says Ed Usset, grain marketing specialist for the University of Minnesota. "If corn prices decide to take a major step back over the next six months, wheat prices will have a difficult time rising."

Usset adds that wheat supplies in general have been pared back worldwide, which could in turn lead to a profitable supply-and-demand balance that deserves to be monitored closely.

"Wheat prices for 2013 are appealing," he says. "I hope that wheat producers have wrapped their mind around early pricing opportunities for 2013 delivery."

There are several factors to watch for in 2013, says Brian Williams, assistant Extension professor at Mississippi State University.

"The biggest factor in terms of wheat supply is to watch the drought situation on a global basis," he says. "Australia has seen some relief lately, but it looks like it is too late to have much of an impact on the current crop.

"In terms of the U.S., much of South Dakota, Nebraska, Oklahoma and Kansas are still in an extreme drought. Rain and snow over the winter and into the spring will play a vital role in determining wheat production in 2013," he says.

Upcoming USDA reports on crop progress should provide a good estimate of field conditions and how much wheat has been planted as we move closer to spring, Williams says.

Although wheat stocks are relatively low at this time, Williams says they are not dangerously low. The market will typically correct itself before this happens, he says.

"Before we see a shortage, prices will rise enough that demand will be reduced, most likely in the form of lower exports," Williams says. "The market has a tendency to regulate demand enough to prevent any serious risks, so I believe that the potential of a shortage has already been built into current wheat prices."

Williams says Mother Nature could have the final say on the crop outlook. He points to the expectations for the corn crop in 2012. At planting time, the industry was bracing itself for a record crop. The Midwest drought last summer knocked it down to the smallest corn crop since 2006.

"We could see the same thing with wheat," Williams says. "But on the other hand, we could see very favorable conditions and have a great crop, as well. Ultimately, weather is the wildcard in  determining exactly what next year’s wheat crop will look like."

Southern Wheat Belt Declared Disaster

The first areas the USDA has designated as disaster areas in 2013 include large portions of the southern Wheat Belt, including most of Kansas, Colorado, Oklahoma and Texas. In all, more than half of the designated counties are in the Wheat Belt, stretching from Texas to the Dakotas.  Kansas, which produced the most wheat of any U.S. state in 2012 with 382 million bushels, saw 88 of its 108 counties included.

In all, 597 counties in 14 states received the disaster designation from USDA Secretary Tom Vilsack. These counties all shared a drought intensity value of at least D2 (Drought Severe) for eight consecutive weeks as measured by the U.S. Drought Monitor. This past year, USDA designated 2,245 counties in 39 states as disaster areas due to drought.

The silver lining is that the designation allows all qualified farm operators in the areas to be eligible for low-interest emergency loans.

"As drought persists, USDA will continue to partner with producers to see them through longer-term recovery, while taking the swift actions needed to help farmers and ranchers prepare their land and operations for the upcoming planting season," Vilsack says.

You can e-mail Ben Potter at bpotter@farmjournal.com.

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