Analysts expect lower grain prices in 2014

Market experts say grain prices will be lower in 2014 due to high global production and ending stocks.
Matthew Weaver

Capital Press

Published on January 6, 2014 11:05AM

Last changed on January 6, 2014 11:53AM

John O'Connell/Capital Press
Wheat is harvested at Johnson Farms in Tyhee, Idaho, Aug. 2. Analysts predict wheat prices will be lower this year than in previous years.

John O'Connell/Capital Press Wheat is harvested at Johnson Farms in Tyhee, Idaho, Aug. 2. Analysts predict wheat prices will be lower this year than in previous years.

Buy this photo

Market analysts anticipate lower grain prices in 2014 compared with recent years.

Daniel O’Brien, agricultural economist at Kansas State University Extension, said the lower wheat prices coincide with larger supplies worldwide.

“What is causing wariness in the wheat market is world production is up sharply, a record high, near-record supply and ending stocks growing from the previous year,” O’Brien said.

Byron Behne, marketing manager for Northwest Grain Growers in Walla Walla, Wash., recalled 2010, when soft white wheat prices dropped to $4.50 per bushel on the Portland market.

“I don’t think we’re too far away from possibly repeating that,” he said.

In recent years, white wheat attracted high prices as a feed replacement for corn, which was at record high prices. But this year, there’s no way to get rid of excess wheat except for exports, where wheat faces increased competition from Canada and Australia, Behne said.

Corn prices are about a third lower than recent highs, falling from more than $300 a ton to roughly $185-$190 per ton, said Dan Steiner, grains merchant for Pendleton Grain Growers and Morrow County Grain Growers. Wheat has also lost a lot of ground without the support from corn prices, he said.

Soft white wheat prices averaged $6.99 a bushel on Monday at Portland compared with about $8.33 a year ago, according to the USDA Market News.

Soft white wheat, which is primarily grown in the Pacific, is a niche crop, so it may be able to maintain its value if winterkill or damage issues arise. But global wheat supplies are high, he said.

“What the market really needs is a dose of good news,” Steiner said. “It needs to find some big demand, something solid to hang its hat on.”

DTN Senior Analyst Darin Newsom wonders whether the cash corn market will fall to a government-guaranteed loan rate, about $1.95 per bushel.

“If that happens, then are we going to be facing the domino effect?” he said. “Once corn collapses and wheat and soybeans go, then maybe cotton, rice, cattle and hogs each in succession start to fall down as well.”

If the corn cash market develops and price ratios continue, Newsom estimated soybean cash prices could fall to $6 to $6.50 per bushel and wheat could reach the low $4 per bushel range on the Chicago market.

Such a scenario isn’t likely to happen in 2014, but Newsom said problems could arise by early to mid-2015 “if we stay on this path of larger production and demand plateauing.”

Behne hopes the Jan. 10 stocks report from USDA will be bullish for wheat, giving the market a chance for a short rally. If so, that would probably be a time to sell some grain, he said.

“Without a weather problem somewhere in the Northern Hemisphere this year, we’re going to have plenty of wheat around,” he said.

Recent cold weather will likely lead to winterkill issues for the 2014 winter wheat crop in the Midwest, he said. At that point, wheat farmers should use the rally as a chance to get some pricing done.

If drought conditions persist in central United States and production drops, the market could stabilize, he said.

“These are all variables that are still in play,” he said. “This is not the final nail in the grain complex coffin, but if we go down the path it looks like we’re on, it certainly looks like we should be lower in December 2014 than we were in December 2013.”


Share and Discuss


User Comments