The smallest spring acreage in 45 years and dry weather in the winter wheat area could lift wheat prices
Spring wheat acres will likely fall in the United States, which may help fuel a price rally in the crop, say analysts.
Allendale is forecasting 11.25 million acres, which would be the smallest spring wheat crop since 1972.
“There still is a long-term need for this wheat,” said chief strategist Rich Nelson.
“However, it’s just simply that we’re swamped by the feed quality wheat right now.”
The global glut of feed wheat is pulling down the entire wheat complex, including spring wheat. Prices are not at a sufficient level to maintain last year’s plantings of 11.6 million acres.
If U.S. acreage declines it would lift Minneapolis spring wheat futures, whiich are also the benchmark for Canadian hard red spring wheat.
Arlan Suderman, chief commodities economist with INTL FCStone, hasn’t finalized his spring wheat number yet, but he thinks it will be lower than Allendale’s forecast.
“I actually think I’m probably going to end up being below 11 (million acres),” he said.
Suderman has conducted a state-by-state analysis of crop budgets.
“Wheat just doesn’t compete at all, and then anecdotally we have been hearing stories about wheat seed sales being down dramatically this year.”
Suderman is curious what number the U.S. Department of Agriculture will come up with for spring wheat in its March 31 Prospective Plantings report.
“That’s where we could have the potential big surprise, frankly, and see a much lower number than what the trade is expecting,” he said.
Based on the crop budgets, he believes it is possible spring wheat could fall below 10 million acres in that report.
Erica Olson, marketing specialist with the North Dakota Wheat Commission, said that is highly unlikely.
She said crop budgets are bad for most crops, not just spring wheat.
“There is one clear winner, but they can’t plant everything to soybeans,” said Olson.
She acknowledged that the consensus is spring wheat acres will be down. That will most likely be the case in North Dakota, where there is bound to be a lot more soybeans.
However, winter wheat plantings were down in Montana and South Dakota, so Olson thinks growers may maintain or slightly increase spring wheat plantings in those states.
As well, she brushed aside Suderman’s concerns about dismal seed sales because growers may be using farm saved seed instead, which they tend to do when finances are tight.
In some of the recent producer meetings Olson attended, growers sounded a little more optimistic about price prospects for the crop.
Their optimism stems from the second lowest U.S. winter wheat acreage on record and mounting drought concerns in the winter wheat producing region.
“I would think that would get prices going. Now how much and how long, I’m not sure,” she said.
The other factor working in favour of spring wheat prices is the brisk export program. Exporters had shipped 5.83 million tonnes of the crop through March 9 compared to 4.66 million tonnes a year ago.
Suderman is also forecasting a price rally because of the smaller U.S. winter wheat crop, a dry pattern developing earlier than expected in the Black Sea region and prospects of El Nino reducing Australia’s crop by one-third.
“We seem to be turning the corner and moving towards tighter supplies globally,” he said.
He believes prices will improve once the funds start picking up on those changing fundamentals.
“I think that’s what we’ll see this year. Not a bull market by any means, but I do think we’ll see global prices kind of work their way higher than what they were in 2016,” said Suderman.
Nelson believes the recovery will take longer with wheat prices posting a “significant low” in 2017 before rebounding in 2018.
However, he said an argument can be made for lower-than-trend-line winter wheat yields if the National Oceanic and Atmospheric Administration spring forecast for warmer-than-average temperatures holds true. That would help bolster all wheat prices.