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.
Would depress corn prices
Farmers know that at least an average U.S. corn production year in 2014/15 — adding to this year’s record supply — could further suppress corn prices.
Additionally, this year’s best fall planting conditions since 2010 may encourage farmers to plant wheat. While still below the five-year average in most areas, soil moisture levels are much improved from this time last year in the central and southern plains.
The percentage of land considered to have adequate moisture is up from 22 percent to 38 percent this year.
Equally important, the areas rated to be in extreme or exceptional drought is down from 23 percent last year to just 10 percent. While this is a positive trend, dryland farmers may take advantage of soil moisture conditions now by planting wheat rather than rolling the dice to see if adequate soil moisture remains in the spring for a corn crop, particularly after the previous two challenging years for corn.
Finally, significant upside demand from China is helping support wheat prices this year and could play a similarly robust role for corn. Reuters has reported that a researcher with a Chinese government think tank suggested China could import 20 to 30 million metric tons (MMT) of corn per year to cover growing supply shortages.
That is equal to as much as four times its current level of imports, around a quarter of globally traded corn and up to twice as much as Japanese purchases, the world’s largest corn importer.
While many factors will shape and re-shape corn’s influence on wheat prices, the ongoing battle for planted area will drive continued market volatility. USW encourages buyers to work with their local USW representative to help identify and take advantage of buying opportunities as the market allows.
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