What is in this article?:
• Prices appear stable as the price ratio of corn and wheat is returning to a traditional relationship.
• Fundamentals are not bullish going into planting for 2012.
• However, concern for global exports and moisture for winter seeding in the U.S. are supporting prices.
Strong prices and basis at planting indicate going ahead and pricing some of 2013 production. Acreage should increase in Georgia and other wheat producing areas.
Given the outlook for supply and demand, some price protection should be considered through either contracting, futures or options.
The price election for soft red winter wheat in Georgia is be around $8.55 per bushel, giving growers the opportunity to protect production costs and a higher level of revenue than in the past.
Premiums will be higher, but price risk protection can be purchased in the form of revenue insurance which allows you to go ahead and market some of the 2013 crop with confidence.
Source: FAS USDA Grain: World Markets and Trade, Circular Series, September 2012
Outlook for the 2013 crop year
The U.S. wheat outlook depends on how well planting goes for winter wheat, particularly soil moisture in the drought stricken Midwest.
There is an ample supply of U.S. wheat with export prospects improving due to a drop in foreign production. Soft red winter wheat stocks are down but will grow in 2013 given normal yields and increased acreage in response to higher prices.
However, relatively high corn and soybean prices will limit the increase of SRW acres (abandonment) come spring.
Cost of production is expected to increase attributed to all inputs. Opportunities to contract wheat for $8 per bushel should be available but done with protection. Revenue insurance should provide protection to contract early as the price election for yield and revenue protection is at least $8.50 per bushel for 2012 wheat.
The bullish run in wheat prices should result in more acres of winter wheat planted. Georgia wheat growers are encouraged to watch for rallies during the seasonal period before planting.
Spring rallies are also a time to watch due to corn and soybeans competing for spring acreage. Basis could improve between now and harvest, especially if futures prices begin to fall.
Marketing is an important part of farming, but it takes consistent monitoring of the market to take advantage of opportunities.
In the long-run, low cost producers will be successful in wheat production. Low cost producers are those who maximize yields while controlling costs.
Knowing your costs and managing production are the key combination to profitable farming.