Wheat's wild ride boosts fall planting intentions

Wheat farmers throughout Ohio could be planting more wheat this fall, as the demand and price per bushel has increased because of a recently announced ban on wheat exports from Russia. 


Drought and wildfires are becoming common terms in Russia, as the wheat harvest is on the line. Approximately 20% of Russia’s wheat, a combination of hard red winter wheat and hard red spring wheat varieties, has been destroyed because of these natural occurrences.


In 2009, Russia was the world’s third-largest exporter of wheat, only trailing the United States and the European Union.

“It’s very likely that overseas buyers will turn to the U.S. in the short term to fulfill their needs,” said Dwayne Siekman, Ohio Wheat Growers Executive Director. “It’s too early to estimate the impact that it will have on planting decisions this fall for Ohio farmers; however, Ohio farmers are up for the challenge.” 


Ohio is the nation’s leader in growing soft red winter wheat, used in pan breads, general-purpose flour, cookies and crackers. Farmers in Ohio will plant wheat in the fall following the corn and soybean harvests.

If implemented, the Russian ban would go into effect Aug. 15, 2010, and last until Dec. 1, 2010, but some Russian sources say the ban could last until 2011 or even 2012. Ohio State University agricultural economist put together a few key facts regarding the Russia situation.

  • · Russia, Ukraine and Kazakhstan are all major exporters of wheat through the Black Sea. In the May report (before the drought began), the USDA forecast that Russia, Kazakhstan and Ukraine would export 17.5 million metric tons (mmt), 7.5mmt, and 7.5mmt, out of global exports of 129 mmt.
  • · Current estimates are that total wheat production is down by 10 to 20 mmt from forecasted levels. A good portion of this is feed wheat — the Black Sea exports lots of feed wheat — so much of this can be replaced by either corn or other coarse grains.
  • · Imagine a “worst-case” scenario that Russia exports no wheat this year, and between Ukraine and Kazakhstan, they export only 10 mmt, this would leave a 27 mmt hole in the export market, which is about 13% of total wheat and coarse grain trade, but only about 1.5% of global wheat and coarse grain production.
  • · Therefore, there is no reason to expect that we will return to a 2008-style price scenario this fall. However, if moisture doesn’t improve in Russia, it will adversely affect the winter wheat plantings, which will potentially further reduce wheat output.
  • · Finally, the greatest affect that the current drought has on the global grain trade is to reduce global inventories. They are still above where they were at 2 years ago, but this drought is moving them toward lower numbers, which places more pressure on wheat producers next year. Lower inventories reduce the ability to buffer shortfalls.
  • ·For the U.S., it should help exports. U.S. wheat exports may potentially increase by 300 million bushels, which would help in reducing the amount of wheat currently in storage in the U.S. Corn exports will also likely benefit. U.S. corn exports will probably see a 100 to 150 million bushel increase in the 2010/11 marketing year, replacing feed-quality wheat in world markets.

The situation in Russia is not the only trouble spot for wheat production around the globe. Australia and others are facing drought and poor production levels, which moved the Food and Agriculture Organization of the United Nations (FAO) to reduce its production forecast this year.

“Seed distributors went from not being able to give wheat away to being worried if they will have enough,” said Mark Wachtman, president of the Ohio Wheat Growers Association (OWGA).
 


Despite the increase in wheat prices because of global production concerns, the FAO claims world-existing stocks will cover the production decline. Many are also waiting on the release of the World Agriculture Supply and Demand Estimates report in August that will be a stronger barometer about wheat, corn and soybean production throughout the world to determine long-term impacts. 
 


Brad Haas, chairman for the Ohio Small Grains Marketing Program (OSGMP) and board member for OWGA, said, “No one really knows for sure what will happen to the market. It’s hard to say with the different grades of wheat.”
 


The increased prices of wheat have increased interest in planting the crop this fall.

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