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Planning for 2008 all about grain

“Wheat price sets new record.”

“The United States will dominate the wheat export market for the near term.”

“Wheat eclipses corn as investor’s new darling.”

Market news headlines and articles are heralding skyrocketing wheat prices.

And, water-short California farmers are borrowing a line from the King: “Thank you very much” for the good news.

Irrigated wheat normally is relegated to a slightly profitable or good rotation crop status in California and Arizona. Water and land costs and overall costs of production push crops like cotton, alfalfa, processing tomatoes, vegetables, and other typically higher value crops well ahead of wheat on the list of row crop choices.

However, this year wheat is back in vogue, partly because of current $200 per ton prices for hard red winter wheat and even more for pasta-durum wheat.

Wheat also is moving up the ladder of crop choices because of water or lack thereof, especially in California. The recent ruling by the federal court judge limiting water deliveries south of the Sacramento-San Joaquin Delta to protect an endangered minnow has growers thankful that there may be money in wheat this season. It is a fall-planted crop that with a little help from normal winter and spring rainfall can make a respectable crop without using a lot of expensive water.

The current high interest in wheat follows a year where record corn prices made it a promising crop alternative.

California growers planted 620,000 acres of corn for all purposes (grain and silage) this season, an increase of 19 percent from last year. In August, USDA/NASS estimated 190,000 acres of that was scheduled for grain production.

Corn for grain production in California for 2007 is forecast at 931,000 tons, up 83 percent from last year’s crop. However, a last run on that silage by Central Valley dairies may change the final grain acreage.

Dairies went after grain corn for silage with some heavy dollars, proving once again the No. 1 ag segment in California, dairies, has a major influence on California farming.

Jim Brazil farms 300 acres of alfalfa, corn and cotton in Laton, Calif., with his brother Gary. Jim Brazil also is a custom applicator who found his client base cut by 50 percent with a big reduction in cotton acreage in the area where he works.

‘I lost 2,000 acres of commercial cotton spray business to corn this year. I still had 2,000 left,” but the 30-year farming veteran started looking into other custom work to make up for the income loss. He turned to custom combining, running a pair of corn harvesters this season.

However, that went away quickly, not long before the grain started drying down and he was getting ready to start harvesting. “I had about 1,500 acres of grain corn lined up. I wound up with 500 acres because the dairies ran out of silage corn and started paying $32 per ton to get silage. A lot of growers opted out of their grain contracts and sold the corn for silage,” he said.

Corn prices have not softened so far, and Jim Brazil talked with producers during harvest who are going back into corn, if they have water. Water will make the biggest difference in corn acreage from 2007 to 2008, regardless of prices.

“They are talking $160 per ton for corn next year. The corn I have been harvesting is yielding five and a half to six and a half tons, which is about average.”

Corn is a big water user, larger than cotton or even processing tomatoes on drip irrigation, so it will not be an option for producers who are facing an uncertain 2008 water prospect.

“The area south of Hanford has no surface water and they will go with wheat and well water. Fortunately, I have heard prices of $200 per ton for wheat,” he added.

Many are expecting cotton acreage in California to continue to decline next season, mostly due to water concerns.

Jeremy and Gary Hughes, a father and son partnership farming out of San Joaquin, Calif., jumped into corn this season like many others. “It has been 30 years since we grew corn, and we planted it for grain.” Jeremy Hughes had 60 acres. His dad grew 90 acres.

However, dairies ran out of winter silage earlier than they had anticipated and went looking for summer silage. They found a lot in fields scheduled to be harvested for grain corn before they dried down.

“I was lucky with my corn because I was three to four weeks ahead of double cropped corn when the dairies started running short,” he explained.

His phone started ringing in the early summer with calls from dairies and silage brokers looking for feedstuff. “I called my seed salesman and asked if the variety we planted for grain would work for silage. Fortunately, it used to be one of the higher yielding silage varieties. It just did not have the stay green gene in it so it would dry down for grain.”

When the dairies came knocking with the $32 contracts, it was more than green enough. The price was up from $24 last season. The two blocks yielded an average 28 tons per acre. The dairies hauled it as far as 20 miles from the Hughes farm, an unusually long haul that reflects the severity of the summer silage shortage.

Even with the likelihood of another good corn price year, Jeremy said silage brokers need not come knocking next summer because he does not plan to seed corn. It takes too much water. As a farmer in Westlands Water District, he does not have any idea how much water he will get and wants to preserve what comes down the ditch primarily for tomatoes. He hopes to offset any summer crop acreage cutback with wheat.

“Two weeks ago I heard hard red winter wheat prices were up to $205. It has come down since to about $197 per ton as the word gets out about the water shortage and how farmers are looking hard at wheat where there is a limited water supply,” he said. Durum was quoted at $215.

“Right now I am thinking we will drop corn and sugar beets and go with winter wheat to make sure we have enough water for tomatoes, which generate more cash than other crops.”

It takes about 2.5 acre feet to produce tomatoes or cotton with the drip irrigation the Hughes family recently installed. Corn takes 3.5 acre feet. “You have to irrigate corn every two weeks,” he explained.

Wheat takes about 16 to 18 inches of water, maybe as little as 10 to 12 inches if there is winter rain. “We can irrigate wheat with wells during the winter and save the Westlands water for tomatoes.”

The demand for wheat is due to weather-related production problems in Europe.

For now, the United States, the world's top wheat exporter, is the only nation with large amounts of wheat for sale abroad, traders say. U.S. wheat weekly export sales have already hit levels not seen since 2003. The U.S. is capitalizing on drought that slashed yields in Ukraine and Russia, and rain hurting the French wheat crop.

There is good demand throughout the international community for U.S. wheat. The situation may be exasperated by possible rains in western Australia. The wheat crop in Australia, typically the world's No. 3 exporter, has been hurt by searing winds. Production estimates this year are being revised down.

Marketers also are closely watching developments in India, where opposition political parties have criticized the government for importing wheat.

India, the world's second-largest wheat producer, has purchased wheat. It imported wheat for the first time in six years in 2006, buying 5.5 million tons mostly from Australia.

Sales are soaring despite wheat futures prices at the Chicago Board of Trade hovering near 11-year highs.

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