Indications of a high insurance guarantee should ensure that
US farmers lift sowings of winter wheat, potentially by 2m acres, despite
dryness in some major growing areas.
Official data earlier this week showed US sowings of winter
wheat, typically roughly two-thirds of the overall wheat crop by production,
lagging the average pace, with dry conditions which have speeded corn and
soybean harvests dissuading many growers from planting yet.
"About 25% of the hard red winter wheat area looks dry, and
maybe in 15% it is looking somewhat of a problem," Dan Cekander, director of
grain market analysis at broker Newedge, said.
However, US winter wheat sowings looked set to end "slightly
up", especially once some growers now absorbed in unusually early corn and
soybean harvests switch their attention to the grain.
"First they have to get their soybeans harvested. Then, some
later September, Illinois will think about planting wheat," he said.
A high indicated insurance payout rates of $8.78 a bushel on
hard red winter wheat, and elevated levels on other varieties too, are offering
a "strong incentive" for plantings, Benson Quinn Commodities analyst Brian
While this price is set to be modified, and averaged out
with prices later in the season, "that will attract acreage".
"Last year's $8.65 a bushel was attractive, and this is
higher," Mr Henry.
"It is going to make farmers make a start on winter wheat
planting, make them think it is worth investing $60-65-70 an acre in that."
Mr Henry forecast US wheat sowings for the 2013 harvest
rising 1.5m-2m acres, a third successive season of increase although still
leaving sowings, at 57.5m-58m acres.
The figure is in line with an estimate from Texas A&M
University, if below historical levels, with plantings for the 2008 harvest
topping 63m acres.
And ideas of higher sowings received support from Gary
Schnitkey, agricultural economist at the University of Illinois, despite
findings that economics in southern Illinois - soft red winter wheat country -
did not support the idea of a significant rise in seedings of the grain.
Projected returns on growing corn, soybeans or wheat "do not
suggest large increases in wheat acres", Professor Schnitkey said in a paper on
Even the $42-an-acre advantage of growing winter wheat and a
follow-on soybean crop, over planting just the oilseed, "may not result in a
large increase in wheat acres".
Wheat vs soybeans
For hard red winter wheat, the main US wheat type, and grown
largely south and east of the soft red winter wheat heartland in the Midwest,
projected returns looked "competitive" with those of soybeans, Professor
Schnitkey told Agrimoney.com.
Soybeans for delivery in November 2013 were trading at
$13.63 a bushel in Chicago on Wednesday, a discount of more than $3 a bushel,
or 18%, for crop for delivery in November this year.
For hard red winter wheat, futures for the 2013 crop were at
a discount of less than 2% to December prices.
"It looks like the market is anticipating at least a normal
South American crop," signalling a strong recovery from the last, drought-hit
crop, and enough to bring the region back in earnest into the export market.