What is in this article?:
- Corn playing big role in U.S. wheat price discovery
- Would depress corn prices
• As winter wheat planting season quickly approaches, wheat farmers and their customers should closely follow how the corn-wheat dynamic plays out for 2014/15.
Corn continues to play a very influential role in U.S. wheat price discovery.
Wheat futures have been following corn futures up, sideways and down — sometimes in spite of solid wheat fundamentals. This linkage probably will not change anytime soon as the this year’s corn harvest is likely to set new U.S. and world records.
Following a sharp decline in 2012/13 due to drought, ample supply this year pushed both corn and wheat futures lower, albeit at different rates. As winter wheat planting season quickly approaches, wheat farmers and their customers should closely follow how the corn-wheat dynamic plays out for 2014/15.
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Although the shift has slowed somewhat, the trend for U.S. wheat to lose planted area to corn and soybean production continues.
Chinese driven demand for soybeans and the emergence of corn-based biofuels increased the profitability of these crops at a faster pace than wheat. In addition, new varieties with dramatically higher yield potential helped corn and soybeans expand into traditional wheat growing areas.
After this year, however, U.S. farmers may plant more wheat and soybeans and less corn for 2014/15, according to a new Farm Futures magazine survey released Sept. 3. One year of lower planting would hardly reverse the trend, but additional factors indicate more farmers may increase their wheat planted area this fall.
First, as of Sept. 4, the nearby CBOT soft red winter (SRW) wheat contract held a $1.35/bu premium to CBOT corn, the largest such spread in early September since 2010. That premium increases to $1.77/bu for the March 2014 contacts.