Larry Stalcup

March 21, 2011

2 Min Read

 

Wheat futures prices took a $2.80/bu. ride in market swings following the 9.0 earthquake and tsunami that are creating havoc for Japan. May Chicago wheat futures tumbled from about $8.30/bu. in early March, down to about $6.50 last week following the disaster and back up to near $7.50, before settling at $7.23 at the close on Friday.

A $2.80 variation in prices in just over a week. Really?

It wasn’t that long ago that prices moved less than that over an entire year. With huge investments in commodities from funds and other non-agriculture forces wheat and other grains are highly volatile markets that react to anything and everything that can disrupt production, movement or consumer confidence.

Strong marketing savvy will be a key in whether growers can hit some of the highs and escape some of the lows in the wild ride. But first they must make a crop. While some parts of the country are eyeing good production, the High Plains region remains extremely dry.

 “While the supply situation in wheat is not as tight as in corn, the market is likely to focus more on the very dry conditions in the U.S. hard red winter wheat belt,” says Elaine Johnson, marketing consultant/broker with Cattlehedging.com. “Only 26% of the crop in Kansas is good/excellent. Areas in Russia remain less than favorable, as well. A continued lack of rain could lead to a strong rally in the wheat.”

Mark Welch, Texas AgriLife Extension grain market specialist, says the latest crop condition scores show further stabilization in the yield potential of the Texas crop, but at the comparably low levels of the 2009 crop. “The crop ratings the last three weeks show 56% in the very poor and poor categories and a score of 237-239,” says Welch. “The Kansas crop held this week at 40% very poor and poor while Oklahoma improved slightly, from 41% very poor and poor last week to 39% currently.

 “With the Texas crop emerging from dormancy, soil moisture conditions become more critical for yield potential. While this season’s topsoil moisture index is just above that of 2009 and the disastrous crop of 2006, late-season moisture in those years provided some degree of yield benefit. We are at that critical juncture in 2011.”

Welch says the La Niña weather event “is waning, but it may be too late for the Texas wheat crop. The three-month forecast continues to call for below-normal precipitation in the already-driest areas of the southern High Plains winter wheat growing areas.”

It’s hopeful that growers in the dry areas have solid crop insurance, as well as marketing plans in place for the run toward harvest – which may see prices as shaky as they have been the past two weeks.

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