WINNIPEG – Analysts say it will be a weather market in the United States this summer. A closely watched report released last week by the U.S. department of agriculture shows farmers there intend to plant less wheat, corn, soybeans and other feed grains this year than the industry expected.
“I think this report paints a rather interesting summer, especially in light of the feed grains,” said Daniel Basse of Ag Resource in Chicago, Ill.
“We’re going to need every bushel that we can produce this year across the United States and we really don’t have much room for error in terms of yields at all,” Basse said.
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“Start expecting a lot more market volatility, and it should be a good time for the traders,” added Larry Acker, an independent analyst in Chicago.
The USDA annual planting intentions report shows farmers plan to seed almost 3.3 million acres of durum and 18.4 million acres of other spring wheat, almost 6.8 million acres of oats, and just over seven million acres of barley.
While spring wheat acreage will remain around 1994 levels, durum will rise slightly more than 15 percent as farmers try to capture premiums for the crop.
Traders had expected spring wheat acreage to rise to more than 18.61 million acres. Neal Fisher of the North Dakota Wheat Commission said disease problems in the Red River Valley in his state could account for some of farmers’ reluctance to grow the crop.
Fisher said that farmers in the northern wheat belt could change their minds in the next few weeks as premiums fall for durum. And a lot depends on moisture conditions.
“Every day we have more of this snowy cold weather, we could push ourselves a little more toward oilseeds or something like that if we run out of time on the spring wheat and durum,” Fisher said.
Charlie Pearson, an analyst with United Grain Growers in Winnipeg said he wasn’t too surprised with the lower-than-expected planting intentions for wheat.
Pearson said the forecast is “somewhat optimistic” for Canadian wheat growers because relatively tight supplies could put upward pressure on prices.
Barley will be down about two percent. While not a surprise to traders, Pearson said this “continuing decline” could open up more U.S. markets to Canadian barley.
The report also showed that U.S. farmers will plant less corn and soybeans this spring after producing all-time record large crops last year. The corn acreage estimate was below trade expectations, and corn futures were expected to trade one to two cents higher.
Because the feed grain situation will be tighter, Pearson said barley prices could move up “closer to par” with corn.
Seeded acres of oats will rise 1.6 percent. But Pearson said many of these acres are used for cover crop and forage for cattle, leaving harvested acres down about nine percent.
Pearson said he expects oat acreage in Canada to decrease too. Oat production in Finland and Sweden may also drop because the two countries recently joined the European Union and may not be able to subsidize the crop as heavily.
“I think today’s numbers pretty much solidified that whatever floor is underneath these markets will remain at least through the middle or latter part of May,” Basse said.
