Wheat to battle corn, soy for 2008 acres, analysts says
Each wheat crop is unique in its own way, but for wheat farmers the 2007/2008 wheat crop year has started out to be one of the most unusual in memory.
Hammered by drought, the 2006/2007 wheat crop was the smallest since 2002/2003, and U.S. ending wheat stocks of just 456 million bushels were historically low. Wheat prices climbed in reaction to tightening supplies.
The national average farm gate price for wheat during 2006/2007 was $4.26 per bushel, about $0.85 higher than the prior year. Attractive prices induced U.S. wheat growers to expand their 2007/2008 wheat area by more than 3 million acres giving rise to predictions that potential production could reach close to 2.3 billion bushels or nearly 500 million bushels more than last year's small crop.
A number of things happened to change the outlook for the U.S. wheat crop in 2007/2008. Winter wheat acreage did expand as anticipated, and for a change, fall moisture levels were adequate. As winter wheat emerged from dormancy in February and March, crop prospects for both hard red winter wheat and soft red winter wheat (SRW) were excellent. However, a hard freeze during Easter Weekend in April caught large areas of HRW and SRW in the joint stage.
At first, it was thought damage was minor. Later on it became clear that the freeze had cut winter wheat production by 50 to 80 million bushels. Then, just as hard red winter wheat (HRW) was reaching maturity, monsoon-like rains came. Beginning in early May the area from south-central Texas northward through most of Kansas, the heart of HRW country, was inundated by wave after wave of heavy rains. The rains continued throughout May and June and well into July. Those early good prospects dissolved into a soggy mess.
We will not know the full extent of the losses from the freeze and the incessant rain nor how much HRW acreage was abandoned until USDA's September crop report. At this writing it seems clear perhaps as much as 250 million bushels of potential US wheat production was lost. A portion of what remains is of such low quality it will be used for feed.
Last spring's wheat market appeared to offer a great opportunity for Northern Plains growers to increase spring wheat planting. However, the red hot corn and soybean markets offered even more encouragement to plant those crops, and some spring wheat land was seeded with soybeans or corn causing spring wheat acreage to drop below last year.
2008 WHEAT MARKET
As wheat growers look ahead to fall and the seeding winter wheat, they will once again note the impact of another small U.S. wheat crop. USDA last estimated the 2007/2008 U.S. wheat carryout on May 31, 2008 to be a very tight 418 million bushels, the lowest level in 30 years. It may be even less than that. And once again, markets are likely to encourage larger winter wheat acreage.
The U.S. is not the only wheat producing country with production problems. Ukraine and Russia suffered drought that cut their winter wheat production. Presently, Ukraine has suspended the issuance of wheat export licenses to insure that domestic supplies are adequate. The European Union wheat crop suffered its own problems with too much rain falling on ripe wheat in France and Germany and production estimates falling. Canadian farmers cut their spring wheat plantings back sharply in favor of canola. Australia is trying to recover from last year's devastating drought, but its wheat crop will not be available until early 2008. The Argentine government is facing an election this fall, and it has suspended wheat exports in an effort to hold food prices down.