Corn Belt Could See An Increase In Red Winter Wheat
Farmers in the southern and Eastern Corn Belt may plant more soft red winter wheat this year, and for three good reasons, you can look to the weather, crop insurance and prices.
Dwain Ford, a farmer from Kinmundy in southern Illinois, told a group at the Soy and Grain Trade Summit that the remnants of Hurricane Isaac dropped 6 inches of rain on the fields of zero-yield corn he’d rolled over with a Bush Hog rotary mower. The rain came just in time to keep soybean pods from shriveling and drying.
But it also came in time to recharge the soil moisture, which could be good news for SRW wheat planting this fall.
“Now with price increases and the situation we have, if the conditions are right and we start getting rains now … we’re going to see more wheat planted rather than corn,” he said. Wheat followed by a double crop of soybeans is standard practice given the longer growing season in southern Illinois. And current domestic supplies of soybeans are tight too, making the wheat/soybean rotation a more compelling option than planting corn, Ford said.
DTN Senior Ag Meteorologist Bryce Anderson said rainfall patterns are going to improve the moisture situation in the southern and eastern Midwest. He noted that since the beginning of September, Evansville, Ind., received more than 7 inches of precipitation, more than three times its average to date. Cape Girardeau, Mo., had almost double its usual September rain fall to date, and Paducah, Ky., is also 37% above normal.
“These stations are still far short of average rain for the year, but this recent shot of moisture will be very good for getting a crop of wheat planted and established. And there is more on the way for this week as well, possibly another 2 inches or so,” Anderson said.
Informa released its initial acreage estimates for the 2013 crop on Friday. All winter wheat acres are expected to jump 1.4 million acres from last year’s seedings with the bulk of it coming from SRW wheat. Farmers will plant 8.94 million acres of SRW wheat in the 2013 crop year, Informa projects, which is the highest since 2008’s 11-million-acre planting.
Steve Launius is a retired high school agriculture teacher and farms about 750 acres around Nashville, Ill. He’s a small operation and didn’t take out crop insurance this year. Farmers like Launius will plant more wheat this year, he thinks.
“From a cash flow standpoint, if you grow wheat, you’ll get paid in June,” he said.
Crop insurance price guarantees for 2013 SRW wheat are also encouraging. The planting price guarantee for SRW wheat in most of the country is $8.57. Farmers have until Sept. 30 to sign up for crop insurance.
Rumors that Russia will ban exports after drought cut its production continue to support the market and RMA’s price expectation. In the latest Supply and Demand report, USDA cut Russian production by 4 million metric tons and the FSU states by another 4 mmt, tightening the global supply outlook and possibly encouraging exports of U.S. supplies.
And since the beginning of the corn market rally in June (also around the time of SRW harvest) cash prices have rallied $2.50 per bushel from $6.05 on June 2 to $8.57 on Sept. 23.
DTN Senior Analyst Darin Newsom noted that July 2013 Chicago wheat is trading almost $2.25 per bushel higher than December 2013 corn, and the spread in cash prices (SRW-Corn) is roughly $1.25, near the five-year average for this time of year.
“However, if corn yields rebound to 150 bpa in 2013, then gross revenue locking in today’s futures price is approximately $960 per acre,” Newsom said. “If wheat yields hold steady at about 47 bpa in 2013, today’s futures price creates gross revenue of approximately $410 per acre.”
But futures spreads indicate traders are uncertain about the supply and demand future for both corn and SRW wheat next year. The July 2013 SRW contract holds a small inverse over the September contract, while the July-to-December forward curve shows a small 6 cent carry, reflecting concerns about tight supplies. Corn, on the other hand, has a less bullish spread structure than wheat.
“The bottom line is the wheat market seems to be trying to buy acres,” Newsom said. “And producers, tired of adverse weather, will likely oblige, then follow up with double-crop soybeans, depending on the moisture situation.”
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