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Economist describes wheat outlook as bright

Texas Wheat Board working to find a solution to put profit back in growers' pockets.

Increased moisture, particularly on the South Plains, along with production possibilities and a “good fit” in crop rotations, makes for a positive outlook for wheat, according to a Texas A&M AgriLife Extension economist at the Texas Wheat Symposium in Amarillo.

“Wheat is such a good fit in so many places, not only in Texas but around the Southern Plains,” says Dr. Mark Welch. “We’ve lost wheat acres to corn and soybeans but now we’ve seen some higher wheat prices in the last couple of years, perhaps turning the corner on prices, and with the production prospects — wheat just seems to fit.”

As for the price, Welch says even though futures prices are flat compared to a year ago, they are better than they’ve been the last couple of years. And depending on foreign production levels, given the United States only produces about 8 percent of the world’s wheat, the price will rely heavily on what happens other places.

“There is a lot of vulnerability and volatility in other markets as well. So, when it comes to corn and soybeans — what’s that acreage shift going to do and what will the yield potential be?” asks Welch. “We’ve got very strong undercurrents of demand for all of our grain markets so, we need that yield response, whatever we do on acres, to keep up with the demand side to respond particularly in global markets if we can maintain access. Trade in those areas is very positive for all U.S. farmers — livestock and crop.”

With this shift, Welch believes there’s an opportunity on the horizon for higher prices. “Wherever we end up, I think this will be a time when, if farmers have done their budget analysis and have a reasonable expectation given their production prospects of the price they need to cover the costs and perhaps leave in a profit or at least to put in a marketing plan that limits the bottom side, in addition to what you can do with crop insurance and some other issues to eliminate some of that downside risk and leave the top side open, there might be some dramatically higher prices to take advantage of.

“We need to be as efficient as we can and then capture some marketing opportunities as they present themselves. I think the outlook for wheat is as bright as it’s ever been in several years.”

A year in review

In 2018, wheat production in Texas was rated average to below average, producing about 65 million bushels, down from the 80 million to 90 million typically produced, says Ben Scholz, chairman of the Texas Wheat Producers Board at the Wheat Symposium.

A higher potential margin of profitability has caused much of the migration from wheat acres to other commodities. “We are all businessmen, and we’re going to migrate to that profitability.

“Everything I try to reinforce and what we are trying to figure out as an organization, is how to we get profit back into the farmers’ pockets and that ranges everything from the farm bill to trying to get a price with all of the trade challenges we are having with the administration trying to get other countries to make better agreements.”

While an agreement in principle has been reached on the 2018 Farm Bill, Scholz says wheat growers are hoping the reference price will be adjusted. “We are really challenged with our cost of production in reflection to that reference price.”

Winter wheat

As growers transition into the next crop cycle, weather conditions, which have plagued Texas growers throughout the year, have been a barrier to planting this fall, says Scholz who farms on the eastern side of Interstate 35, which runs from San Antonio to Dallas.

“We had two major spikes of rainfall in 2018. The first one occurred in late February right before our spring planting period. In our region, we got some 12 to 14-inch rainfalls. Then we dropped off for the next several months during the growing season with hardly any rain, maybe one-and-a-half to one and eight-tenths inches of rain — some months not showing any rainfall at all.

“Then we came into September when you’ve got fall crops like cotton to be harvested and crops like wheat to be planted. The rainfall spiked right back up again and continued through October.”

While the planting window for wheat in Scholz area is from mid- October through mid-December, he says it’s getting critical as to whether growers in his region will be able to plant their wheat crop.

The Texas Wheat Board, which held it’s meeting in Amarillo in conjunction with the Amarillo Farm and Ranch Show, reported on planting progress in other areas, including the Rolling Plains, where excessive fall moisture has only allowed for 20 percent of the wheat acres to be planted, whereas normally this time of year, the region is l00 percent planted in hopes of turning out cattle.

“It’s a big transition from a dry year in 2017 to a dry period during the growing season in 2018 and then excessive wet on both ends,” Scholz says.

Planting conditions in the Texas Panhandle were reported as much more favorable. “They’ve gotten above average rainfall, but they were able to get their wheat in,” he adds.

2019 Outlook

As the Texas Wheat Board looks forward, hopes are for trade agreements to be resolved and to regain some of its lost export business, Scholz says.

“Mexico is such an important market for the whole United States. It’s our No. 1 wheat export market. Japan is our No. 2. We’d like to see some resolve in the bilateral negotiations. And with the upcoming G20 summit in Argentina, hopefully, there will be some favorable negotiations with China,” he says. “All of those would be positive indicators toward trade. Our U.S. wheat market has to move 50 percent of its production annual, so trade is such an important component to get that price back.”

The bottom line for Scholtz, a 50-year farming veteran, “As a wheat grower and wheat organization leader, we’re doing our best to try to figure out what can we do to get a better price because my focus is profitability, for other wheat growers as much as it is myself.”

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