“Our market is telling us not to plant wheat,” Suderman said at the INTL FCStone Food Industry Risk Academy on Dec. 13. “Even with today’s price in Minneapolis, other crops pencil out better. We expect lower production in all three classes in 2018.”
Chicago and Kansas City winter wheat futures recently fell to contract lows. Minneapolis spring futures were trading about $2 a bushel above winter wheat futures even though at the lowest levels since June.
Although area planted to wheat may not be down 4% to 6%, some of that acreage will not be harvested either because it was planted as a cover crop or because of dryness in the hard red winter wheat region, he said.
Low U.S. wheat prices have encouraged farmers to shift to other crops, unless wheat was needed as part of a crop rotation, Suderman said. He noted ample global wheat supplies as a factor pressuring U.S. wheat exports and prices. Although U.S. wheat area has declined, grain area globally has increased since the early 2000s in part because of weak currency values in relation to the U.S. dollar in some key producing countries.
U.S. wheat supplies also were ample, he said, but ending stocks were “moving in the right direction,” with 2018 carryover forecast by the U.S. Department of Agriculture at 960 million bushels, down 19% from 2017. He said 2019 carryover could decline to the 700-million-bushel area, and could be pulled down to around 600 million bushels if dryness becomes a problem in the hard red winter wheat region.
He also noted the premium the market was paying for hard red winter protein after two years of low protein crops. Although protein premiums have eased somewhat recently, he expects them to strengthen again in the next 30 days.
Suderman said the large net short position held by commodity funds in Chicago wheat and corn futures could play a role in grain prices if something significant happens to change funds’ current short mentality, noting that there was “a lot of buying power” if funds decide to suddenly exit their short positions. He noted a lack of snow cover for Russia’s winter wheat crop, weather reduced production in Australia and quality concerns in Argentina for crops now being harvested and dry conditions in the U.S. southern Plains that made wheat more susceptible to cold weather as factors to watch.