Grain Market Gleanings

Average Change, March Intentions vs June Plantings
USDA’s March 31 Prospective Plantings report estimated that spring wheat acreage will be down about 7% from last year, durum will be down 3% from 2002, and that all wheat will be up 2%, barley up 6%, soybeans down 1%, and corn acreage virtually unchanged from 2002. USDA’s next estimate of U.S. field crop acreage will be June 30. So how much will USDA’s estimate vary in that three-month span?

Based on past history, the June estimate of spring wheat plantings on average tends to be 2% above March intentions, while final durum plantings tend to be 1% larger than the March estimate, according to Bill Tierney, Kansas State University extension ag economist.

June soybean plantings on average are 1% more than the March planting intentions report, while June corn plantings on average are 1% less than the planting intentions report. The standard deviation of the change ratio between March and April is small, notes Tierney. An analysis of changes between planting and final plantings suggests that weather in May appears to be critical in determining total corn plantings; if the weather in May is poor, some corn acres could switch to soybeans.

Track Progress Of U.S. Wheat Crop Online
The USDA posts weekly Crop Progress reports on the web at jan.mannlib.cornell.edu/reports/nassr/field/weather/2003/ . Also, a separate report by the North Dakota Wheat Commission on the spring wheat and durum crop pro-gress is available at www.ndwheat.com/wi/cpr.asp .  Beginning in the second week of April, Kansas State University will begin to estimate winter wheat production projections based on models that correlate weekly crop conditions with yields and abandonment. Similar projections for spring wheat will be available once the USDA begins reporting on spring wheat crop conditions (typically by mid-May). These projections will be posted on the KSU web site, www.agmanager.info .  Click on the “Crops” link.

USDA Overview of 02/03 Wheat Situation
U.S. farmers boosted winter wheat seedings for 2003 to 44.2 million acres, the largest since 1998.  Seedings are up 2.5 million acres from 2002 because of high prices during September and October when most of the winter wheat was planted. 

However, little change is expected in spring wheat area in 2003. U.S. wheat prices are down from the highs of last fall, so alternative crops are offering competitive returns to spring wheat. 

U.S. wheat plantings drop-ped annually from the 1996/97’s high of 75.1 million acres through 2001/02. Low returns to wheat encouraged wheat producers to shift to competing crops, especially soybeans and corn. This trend was slightly reversed in 2002/03 as planted area increased 0.8 million acres to 60.4 million acres. However, this small increase in planted area was more than offset as producers abandoned the largest percentage of planted area since 1936 due to the severe drought. Harvested area was the lowest since 1970, and with drought-reduced yields dropped 2002 production to 1,616 million bushels. This is the lowest U.S. wheat production since 1972.

Further constraining supplies, imports also are dropping as drought reduced Canada’s exports.  Lower domestic production, sharply lower forecast imports from Canada, and lower beginning stocks put projected U.S. wheat supplies for 2002/03 at 2,459 million bushels, the lowest since 1974/75.

The reduced supplies sharp-ly limited feeding and altered milling patterns. The reduced availability of hard red spring (HRS) wheat, with smaller domestic production and fewer imports from Canada, encouraged millers to substitute hard red winter wheat for HRS.  Overall, forecast food use of wheat grain is slightly higher year-to-year as declining per capita flour use is partially offset by a lower flour-extraction rate than last year.

Tightening U.S. stocks and reduced supplies in most of the major exporters boosted U.S. prices significantly. Average farm prices rose to a peak of $4.37 in October, $1.50 above the year-earlier price.  Subsequently, world and U.S. prices began to weaken as foreign millers began taking advantage of the increased availability of wheat supplies from countries exporting through the Black Sea and from the European Union (EU).

While U.S. prices have dropped from their peaks of last fall, they remain well above EU offers. Thus, U.S. exports are forecast to be 875 million bushels, the lowest since 1971/72. This is the first year since 1958/59 that exports have been lower than food use. (From the USDA-ERS 2003 Wheat Yearbook, www.ers.usda.gov/briefing/wheat/ ).

Weather Has Potential To Be Major Price Factor
The U.S. Seasonal Drought Outlook through June as of March 20 shows drought to persist or intensify in most of the spring wheat area and in much of the corn and soybean area. The drought outlook can be found at: www.cpc.ncep.noaa.gov

Putting the latest marketing numbers into 2003-04 balance sheets for spring wheat, durum, corn and soybeans show potential tightness in ending stocks relative to total use, according to George Flaskerud, North Dakota State University extension ag economist. “The bottom line is that prices are likely to be volatile in the months ahead. Marketing plans need to be in place to capture price rallies,” he notes.