For many wheat farmers, it’s near the “best of times” for prices and the “worst of times” for production. Dickens’ immortal words illustrate the critical state of winter wheat overall; teased by strong markets, but weather-beaten by conditions either too dry or too wet from south to north.
Limit-up moves of Chicago and Kansas City markets were reactions to USDA’s Prospective Plantings report on March 31. Chicago wheat futures are in the $8+ range after struggling to maintain $7 in mid-March. KC futures prices were steady and well above $9 after seeing similar pressure just two weeks ago.
Mark Welch, Texas AgriLife Extension grain marketing economist, says the Prospective Plantings and Grain Stocksreports were both bearish for wheat, “but prices surged higher following the reports on the strength of the other grain markets.”
The reports showed all U.S. wheat acres in 2011 at 58.0 million, up from 53.6 million in 2010. Ahead of the report, trader’s expected an acreage projection of 57.3 million, says Welch, which provides a 2011 range of 57.3-58.7 million, if an expected higher acreage number for the June report is figured in.
All wheat stocks were 1.42 billion bushels. “Trade expectations were for a stocks level of 1.399 billion,” says Welch. “The drawdown of wheat stocks this marketing year is slower than normal. In 2010-2011 the rate of use so far is 32% and 31%, suggesting a higher ending stock number at the end of the marketing year than the current estimate (843 million bushels). This year’s March 1 stock level is above last year and the five-year average and is the highest for this date since 1999 (1.44 billion bushels).”
Dan O’Brien, Kansas State University Extension economist, says wheat likely followed corn prices up after the plantings report. He points out that spring wheat plantings were projected at 14.4 million acres by USDA. However, wet conditions in northern growing areas could reduce that number.
Welch says crop condition scores fell in Oklahoma, down 4 points from 272 to 268 with 46% rated very poor and poor, up from 43%. “The wheat score in Kansas went up last week from 278 to 287,” he says, “with the very poor and poor categories accounting for 35% and 37% previously.
“A composite crop condition score of these three states (based on proportionate production the last three years) shows that better readings in Kansas are offsetting deteriorating conditions in Oklahoma and Texas. The precipitation forecast for April does not suggest any of these conditions will improve.”
Kim Anderson, Oklahoma State University grain marketing economist and eWheat market analyst, says growers“may want to hold off pricing wheat until harvest. If yields are higher than expected, prices will probably be lower than the current offer. If yields are lower than expected, prices will probably be higher than the current offer. Either way, lower prices are partially offset by higher yields and lower yields are partially offset by higher prices.”
Disastered wheat is a situation seen by many Western Kansas and southern plains growers whose fields are virtually beyond. Decisions on crop insurance claims are being made across the western third of Kansas, says O’Brien, Kansas State University Extension economist. He says that unless growers receive rainfall on dryland acres, they may be skeptical about replanting anything other than a more drought-tolerant crop like sunflower or sorghum.
In the South, whether wheat is plowed under or harvested, look for more growers to double-crop with cotton, due to sky-high cotton prices. But for growers with parched fields, it all depends on whether rainfall comes. To take advantage of the best of times, the worst of them must be overcome.