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Participants on the wheat evaluation tour estimated the size of this year’s
Kansas crop to be 379 million bushels, after factoring in a 500 thousand
acre reduction in hard red wheat planted and the drought damage in
Southwestern Kansas. The USDA’s estimate of the Kansas crop, released a day
later, was 357 million bushels. For comparison, the most recent six-year
Kansas wheat production average, excluding last year’s freeze and rain
damaged crop, is 344 million bushels.
More than
sixty people from all levels of the wheat industry: producers, grain
merchants, millers, bakers, and commodity commissions, plus media,
government, university, and grain buyers from Mexico, Japan, and Brazil
participated in this year’s wheat tour. We saw wheat that was better than
expected growing in some very muddy fields across Kansas. The exception was
the southwestern corner of the state which has suffered from lack of
moisture since planting time and received little rain from recent storm
systems. Harvest was judged to be 50 to 60 days away; a week to ten days
later than normal.
The report
from our counterparts in Oklahoma indicated a slightly above average wheat
crop for that state. Good yields from Central and North Central Oklahoma
will nearly be offset by disappointing yields from the Panhandle.
A day after
the tour was completed the USDA released the May World Agricultural Supply
and Demand Estimates (WASDE) report. This is the first USDA report of the
year that projects supply and demand estimates for the 08/09 crop and
marketing year. Even though U.S. and global wheat production estimates were
up; 16 and 8 percent respectively, much of the increased production will be
absorbed by greater consumption by people and increased feeding of wheat to
livestock. Also, countries around the world will buy wheat to rebuild
reserve stocks. The USDA took those factors into consideration when they
projected the 2008/09 national average farm price for wheat to be $6.60 to
$8.10 compared to the latest 2007/08 marketing year estimated average farm
price of $6.55 per bushel.
The USDA
projected corn production in the May WASDE was based on the March 31st
Prospective Plantings report acreage number of 86 million acres. Although
people in the industry have been saying producers need to plant more acres,
and corn price rose to give them the incentive to do so, wet fields may
prevent that from happening. In the May 5th Crop Progress report,
the big corn producing states of Illinois and Iowa were still far behind the
normal pace of corn planting. Late planting may put the USDA estimate of
153.9 bushels per acre national average yield in doubt, considering that
corn yield potential drops off rapidly for every day planting is delayed
beyond May 10th.
On the
demand side, U.S. exports of corn are expected to drop by 400 million
bushels next year due to increased overseas production of feedgrains and
lower-priced wheat recapturing its market share of livestock feeding in many
countries. Distillers grains and wheat will displace more corn in livestock
feed rations in the U.S. next year. Ethanol demand for feedgrains, corn and
grain sorghum, will increase by one billion bushels, but will not quite make
up the demand lost in the export and feed sectors. Even so, estimated demand
of 12.7 billion bushels will be greater than projected production by about
600 million bushels and draw down corn ending stocks to the lowest level in
13 years. If total U.S. corn production falls below the 12.1 billion
bushels projected by the USDA, their 2008/09 estimated national average farm
price of $5 to $6 for corn will be low.
In the May WASDE report,
the USDA estimated that domestic soybean production will increase by 16
percent and global production of oilseeds will increase by 8 percent. But
continued strong global demand for soy products will put pressure on
available supplies. The U.S. carryover stock of soybeans is expected to
increase by 28 percent year-to-year, but that will still leave carryover
critically low; a 22 day supply in 2008/09 versus 17.5 day supply at the end
of this marketing year. Surprising to some, the USDA increased the average
farm price of soybeans to $10.50-$12.00 for 2008/09 from $10 per bushel for
the 2007/08 crop and marketing year. Of course, if a large amount of acres
intended for corn are switched to soybeans in the next month or so, price
projections for both crops will change. |