Wheat shortage abroad means opportunity for U.S. farmers
Russia's ban of wheat exports is giving U.S. farmers the opportunity to produce more of the crop to meet demands around the world, a Purdue University agricultural economist says.
Chris Hurt predicted there would be a 50 percent to 75 percent increase in the amount of wheat planted in the Eastern Corn Belt this fall over 2009, a record-low year. Indiana farmers last fall planted 300,000 acres of wheat, which annually is the state's third-largest crop behind corn (6 million acres this year) and soybeans (5.3 million acres).
Because of the expected increased interest in wheat, Hurt recommended that farmers contact seed suppliers now to secure the varieties they hope to plant.
"Seed availability may be the limiting factor on how many acres of wheat get seeded this fall," he says in a Purdue University report.
Drought and wildfires greatly reduced wheat supplies in Russia -- the fourth-largest wheat exporter in the world -- and in neighboring Ukraine and Kazakhstan. In addition, Canada has lost about 16% of its wheat crop from flooding.
Russia's decision to ban wheat exports into 2011 has raised concerns of a repeat of food shortages similar to what consumers faced in 2008. But Hurt said that is unlikely to happen.
"It's very important to recognize that we don't have the entire set of conditions that we had in 2008," he says.
In 2008 the world's wheat inventory was at 20% of a year's use. It currently is at 26% -- still tight but more abundant than 2 years ago. Hurt also said the United States "is loaded with wheat inventory."
"We are the world's largest exporter of wheat, and we have a lot of wheat to sell," he says. "I think the world will buy more. We have it to sell, and that's certainly good news for those farmers holding onto wheat inventory."
Even farmers who aren't holding onto their wheat can capitalize. Unlike last year's wet conditions that made planting wheat impossible for many farmers, drier weather late this summer has offered the outlook for a successful wheat-planting season.
Adding to wheat's attraction is the recovery of prices paid to farmers earlier this year.
"The problems in Russia, Canada and other countries around the Black Sea really have elevated wheat prices this year," he says. "We're seeing prices about $2 higher per bushel than what we anticipated earlier this year."
Farmers in the southern parts of Indiana, Illinois and Ohio could plant wheat and soybeans in the same field. With soybean prices projected to hover around $10 for the 2011 crop and wheat prices above $6, double-crop wheat offers farmers strong financial incentives.
In the central and northern parts of those states where double-cropping isn't as feasible because of the shorter growing season, Hurt says prices are making single-crop wheat competitive, especially on lower-quality soils that may have a yield potential of only 130-140 bushels of corn per acre.
"Generally what we see on those soils is that wheat yields do well relative to corn and soybeans, and the economics look very good for single-crop wheat on that type of land," he says. "In fact, right now it appears the returns for single-crop wheat could even be better than corn or soybeans."