High global supply keeps wheat prices low
COLFAX, Wash. — Randy Suess’ winter wheat here looks better than he expected, but his yields will be reduced.
He typically yields 110 bushels per acre for winter wheat and 65 to 70 bushels per acre for spring, but expects to be 15 to 20 percent lower for winter and possibly even lower on spring wheat. Suess thought dry conditions would be more severe, but his winter wheat was boosted by an inch of rain in June.
Elsewhere in the state, in the Tri-Cities, Connell and Ritzville areas, dry conditions adversely affected crop yields, Suess said.
Suess, a commissioner for the Washington Grain Commission and a board member for U.S. Wheat Associates, began harvesting his winter wheat Aug. 2. He expects to be nearly finished Aug. 15.
Suess is harvesting 450 acres of winter wheat and 450 acres of spring wheat.
Suess’ winter wheat fared better than he expected due to an inch of rain in June.
Whitman County is the top wheat-producing county in the nation with 32.9 million bushels of wheat, according to the USDA’s 2012 Ag Census,followed by Lincoln County in Washington, with 19.7 million bushels, and Chouteau County, Mont., with 19.5 million bushels.
The west side of Whitman County is about halfway through harvest, Suess said. Harvest started about a week to 10 days earlier than normal due to dry conditions, Suess said. He estimates he received 14 inches of moisture this year, compared to the typical 18 inches he usually gets.
Prices are down due to higher wheat crops than expected in Europe and Canada, Suess said. Australia’s wheat crop is still a question, but early estimates have the country, which produces roughly 24 million metric tons, bringing in an average crop.
Of all six classes of wheat grown in the United States, soft white wheat — predominately grown in the Pacific Northwest — has the smallest global carryover from last year, Suess said.
Suess said he’ll still make money, but he was “spoiled” by “extremely good” prices for the last three years.
“Now with the prices being a little bit shorter, and a little bit less crop, there’s going to be less income,” he said. “I think the equipment dealers are going to see it. It’s not going to be a disaster.”
White wheat is fetching about $6.95 per bushel, according to Pendleton Grain Growers in Pendleton, Ore.
“We could spend some time sitting relatively unchanged, the market’s been pushed down quite a ways,” said Darin Newsom, senior analyst for DTN in Omaha, Neb.
Some speculators are interested in buying back wheat contracts that have been sold, which has provided price support, he said.
“The problem is that globally, there remains enough wheat,” Newsom said. “The overall wheat picture remains bearish.”
A USDA report due Aug. 12 could also prove bearish for corn. Wheat prices often follow corn prices.
“Left to its own devices, wheat would probably try to stabilize and climb a little bit out of this hole,” Newsom said. “I just don’t know if it’s going to be able to if corn continues to fall.”
Newsom estimated that corn prices could fall by 50 to 60 cents heading toward the corn harvest. Wheat could drop another 30 to 40 cents across the various markets in the country, he said.
Wheat will need increased demand across all classes in order to see prices begin to increase, Newsom said.
Dry conditions in the Pacific Northwest and across the North Plains could start to trim corn and soybean yield projections that Newsom deemed “astronomically high.” If the market believes the projections aren’t so high, he said, a price rally in the market could begin to build for corn, soybeans and wheat.
Dan Steiner, grains merchant for Pendleton Grain Growers grains merchant, doesn’t expect prices to drop much lower. He expects they will bounce between $6 per bushel and $7 per bushel until harvest is completed, then stabilize.
Wheat farmers who haven’t sold any wheat may wish to do so before the USDA report next week, Newsom said, while also holding some, but not everything.
“Once (the report) comes out, sit back, watch the explosion happen, whichever way it wants to go,” he said. “Once it’s out of the way, we could see some buying come back into the wheat market.”
Steiner advises farmers to do a basis contract or minimum-price contract over the Chicago wheat price if they need cash any time soon, but if they don’t need cash, he recommends waiting, even until November or December.
Suess already has his next planting rotation of winter wheat, spring wheat and peas planned following the harvest. Like all farmers, he says, he’s hoping for more moisture and a better price the next go-round.
“But $7 wheat is better than $5 wheat,” he said. “If it turns to $5 wheat, then we’re all going to be looking for new jobs, because that won’t cover cost of production.”