Multiple factors could push down wheat prices in 2010
By DEAN BRICKEY
East Oregonian Publishing Group
With a lot of the 2010 wheat crop already sprouted, area wheat marketers see the silo as half empty.
Dan Steiner, a Boardman grain merchandiser, thinks 2010 will be a transitional year.
"We do have a number of factors working against us for 2010, but none of them are overwhelming," he said. "A weak dollar would probably be the most difficult hurdle to clear since it would likely have a dramatic impact on the cost of fuel and fertilizer."
Steiner prefers to approach the markets from a fundamental point of view.
"Fundamentally, this market has too many stocks, and we need to 'burn' through these stocks, or have a year when production declines for one reason or another, whether it's weather, plantings or whatever."
Bryce Olson, a commodity marketer at Pendleton Grain Growers, sees an "interesting year" ahead.
Because grass seed prices are low, Olson said, wheat acreage in the Willamette Valley could increase dramatically.
This past year, Willamette Valley farmers harvested 10 million to 11 million bushels of wheat, which is about the same as PGG processed.
As a result, he said, prices went down and exporters could buy grain cheaper from Western Oregon farmers. That lowered demand for Eastern Oregon wheat.
Steiner said 2010 would be a great year for growers to return to a normal rotation and idle some ground, but he doesn't expect massive switches in the Pacific Northwest.
"We could see some big changes in the soft red winter wheat country, if growers were planning on following wheat with corn," he said. "You could easily make the argument in the Pacific Northwest that we will see an overall increase in production due to the 'Valley influence,'" which he said would double Oregon's soft white wheat production.
Olson also is concerned about the 16-week closure of Columbia River dams for maintenance beginning in December 2010.
"How many bushels are we going to be able to ship before that river closes?" he said.
Northeastern Oregon produces about 90 percent of America's soft white winter wheat. Farmers are invested in the equipment to grow it and really don't have an alternative, Olson said.
"In the case of equipment, feed and seed you are dealing with inflation issues," he said. "In the case of inputs, and weak dollars, it increases the cost of fuel and fertilizer.
"The offset is a weaker dollar should, but not necessarily at first, make us more competitive on the export side of the equation."
Steiner said farmers and marketers also must deal with the size of the carryover stocks of wheat worldwide.
Looking into his crystal ball, Steiner said he expects world grain production to decline in 2010 as world stocks are burdensome and prices are relatively low.
"These relatively low prices will no doubt help the world economies as people's priorities have always been food, shelter, then everything else," he said. "Coupled with relatively low prices and increased demand, and lower production for 2010, sets us up for what could be a wonderful 2011, hence 2010 as a transition year."