Wheat prices fell again last week after blizzards blanketed large parts of the U.S. Plains and Midwest with much needed moisture-laden snow.
The lower price should stimulate new demand because it is now cheaper than corn. A growing number of U.S. ethanol makers are now bidding for wheat and U.S. railway BNSF has cut its rate to ship soft wheat from Chicago to Texas and Kansas in response to demand for feed from cattle producers.
This domestic U.S. demand might help offset slower than expected U.S. wheat exports.
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It is still too early to know how the hard red winter crop will perform.
The snow gave a little breathing room but where soils are still frozen, a lot of the snowmelt will run off. This will help refill dugouts and streams — important for livestock watering — but won’t do much for recharging soil moisture.
One immediate effect was to raise the level on the Mississippi River. A forecast March 11 showed the river level at Cape Girardeau, Missouri, just south of where the Mississippi and Missouri join at St. Louis, rising nearly 18 feet to just shy of flood level by the end of the week, but then falling again after the snow has melted.
Kansas is the largest winter wheat producer and the moisture helped improve crop conditions, but they are still terrible.
As of March 10, the Kansas winter wheat crop condition was rated as 32 percent poor to very poor, 41 percent fair, and 28 percent good to excellent.
That is an improvement from February when it was 36 percent poor to very poor, 41 percent fair and 23 percent good to excellent.
But last year at the same time the crop was 11 percent poor to very poor, 36 percent fair, and 60 percent good to excellent.
If it gets dry again it will put the pressure back on wheat prices.
But there is a ceiling on the market due to the expectation of larger production in Europe and a recovery in the Black Sea region after problems last year with dry weather. The United Nations Food and Agriculture Organization expects world wheat output to rise to 690 million tonnes, up 4.3 percent from the 2012 and the second-largest crop after 2011.
Europe and Ukraine will likely increase exports if the weather co-operates and large crops are harvested. But analyst SovEcon suggests Russia’s exports next year will stay at the current crop year’s low level of about 10 million tonnes. In 2011-12 it exported about 21.6 million tonnes of wheat.
SovEcon says the government will likely take the opportunity of a larger crop to rebuild its stocks, which have fallen to minimal levels.
