The outlook for the 2014 spring wheat crop looks positive, although profit margins will certainly be tighter than recent years as the market struggles with a few more bearish factors, says Jim Peterson, North Dakota Wheat Commission marketing director.
"Potential harvest prices projected by North Dakota State University for spring wheat in North Dakota, released in December 2013, are in the $6.70 to $6.90 per bushel range, about $2 per bushel below projections for the 2013 crop. At those prices most areas can still generate a $20 to $30 profit per acre on average yields, but some areas show a small loss. This means monitoring pricing opportunities and taking advantage of minor rallies in the market will prove important," he says.
Peterson makes the following points about the spring wheat market:
•Early expectations are for an increase in spring wheat plantings across the Northern Plains. The increased planting of winter wheat in Montana and North Dakota, one million more acres higher, may curtail some of The level of Canadian crop carryover from a 2013 harvest was well above every expectation. It has bogged down their entire freight and grain handling system and is a primary reason why spring wheat prices have has been under pressure since Dec. 1. In many cases producers are not even able to make cash sales for three to four months out and local Canadian prices are a $1 per bushel and more below U.S. values. If there is no easing in the transportation and marketing backlogs before early summer, then Canadian producers will certainly carry over more inventory into the 2014 crop year than expected.
•In the U.S., ending inventories of spring wheat are forecast to be near 200 million bushels on the heels of a record yielding crop. It would be the highest since 2009 and the market will need proof of expanding demand opportunities to sustain price rallies, especially if acres expand.
•Export demand is running about 10% ahead of USDA projections, even with slack sales to our top two markets, Japan and the Philippines. This indicates that we are seeing a broader base of demand with the current crop. This has been a positive support factor, and with expectations for improving demand into Japan, exports should continue to be a positive for prices.Read more in the March 2014 issue of Dakota Farmer, page 22.