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Price Slump to Curb U.S. Wheat Acres While Russia Expands | KTIC Radio

Price Slump to Curb U.S. Wheat Acres While Russia Expands

U.S. farmers are poised to plant winter wheat on the smallest area in over a century this autumn, as tumbling global prices and fierce competition push the world’s former top supplier into retreat.

But even that shrinkage is unlikely to dent massive global supplies or help bolster prices. The world wheat harvest hit a record in 2016, sending nearby Chicago Board of Trade futures to 10-year lows below $4 a bushel.

The strong dollar is adding to the pain for U.S. farmers, as it makes the exports of competitors such as Russia and Ukraine more attractive. Russia is projected to overtake the United States and the European Union as the top wheat exporter for the 2016-17 season, which ends on June 1, 2017.

Farmers in Oklahoma, the No. 2 winter wheat producing state, face potential losses of roughly $55 an acre for wheat in 2017, according to Kim Anderson, an agricultural economist at Oklahoma State University.

In the heart of Kansas, the biggest U.S. winter wheat state, mountains of harvested grain flank roadsides. Cash prices in some parts of the state have slid below $3 a bushel.

“Farmers are optimistic people,” said Doug Keesling, who farms 2,500 acres in Chase, central Kansas. “But that optimism wanes low in times when every day you drive by and see piles of grain that are not moving.”

Because the low prices are almost certain to mean losses for all but the most efficient operators, farmers will rein in the amount of land they are willing to plant with wheat.

Plains farmers may shift to winter canola or spring crops such as sorghum, corn and soybeans. In areas where raising cattle looks profitable, some will plant wheat to use as grazing pasture, rather than harvesting it as grain.

“Right now the market is not doing anything to encourage additional wheat plantings,” said Justin Gilpin, chief executive of the Kansas Wheat Commission.

Forecasters including Farm Futures Magazine and Arlan Suderman, chief commodities economist for INTL FCStone, say plantings of hard red winter wheat, the largest U.S. class, could fall roughly 5 percent from last year, when American farmers seeded the fewest winter wheat acres since 1913.

The U.S. Department of Agriculture will issue its first estimate of U.S. 2017 winter wheat plantings in January.

RUSSIA, UKRAINE AND FRANCE

Meanwhile, some major U.S. competitors in the Northern Hemisphere are taking the opportunity to plant even more wheat this season.

In Russia, farmers sowing winter grain plan to increase the area by 6 percent from a year ago to 17.35 million hectares, Agriculture Ministry data showed.

“Russian farmers are seeding more wheat due to positive margins in rubles,” Dan Basse, president of Chicago-based AgResource Co, said on the sidelines of a grains conference in Moscow.

A senior Ukrainian agriculture official said last month that farmers were likely to increase plantings of winter grains to 7.3 million hectares, from 7 million last year. The area under winter wheat could reach 6.5 million hectares.

In Europe’s top producer France, where wheat has traditionally been the most profitable crop, plantings for 2017 should approach 5 million hectares, roughly in line with the record 5.2 million seeded for 2016, said Remi Haquin, head of the grains committee at farm office FranceAgriMer.

However, a drought that has slowed French winter rapeseed sowings could limit wheat as well, Haquin said.

Weather might just swing decisions in the United States, too. The Plains has had good rains this month, a factor that could entice farmers to take a chance on wheat despite the poor price outlook.

After planting, Suderman said of farmers, “They can always decide to wait until spring and see what their options are.”

 

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