Though wheat acres were a 100-year low this past season, growers may be turning to wheat this upcoming year. An improving profit picture and production advantages may make wheat the better option for many producers.
Wheat on the Rise
“The current dynamics suggest we need to lose a significant amount of soybean acres for 2019 because we’re overproducing soybeans,” said Arlan Suderman, chief commodities economist for INTL FCStone. “Corn can’t take all those acres. So, wheat will likely take some of those acres, particularly in Northern Plains.”
The other reason for this change is the wet weather the Southern Plains has been faced with this fall. The wet weather delayed summer harvest of row crops and the planting of double-crop wheat acres.
The USDA forecasts 51 million acres of wheat in the U.S. for 2019. Though this is up from last year, it still doesn’t compare to acres planted throughout the past 10 years. However, even if wheat is sowed later than normal it shouldn’t dramatically reduce production.
Globally, the U.S. ranks fifth in wheat production. Russia controls the market because of transportation and production advantages.
“The U.S. is the world’s residual supplier of wheat,” Suderman said. “The world generally doesn’t come to us until they’ve used up other alternatives.”
For the last year, oversupply has been the headline of global discussion. A massive crop occurred in 2017 and 2018 brought average yields. In light of this, supply is expected to dry up after the first of the year. This is where the U.S. comes in.
Given the supply situation, this should send more export business to the U.S.
Soybean See Saw
Experts suggested a big driver behind a rise in wheat production would be a decline in soybean production. However, some agronomists are not sensing a decrease in soybeans.
Roger Plooster with Golden Harvest Seeds said he’s been talking to a lot of growers this fall.
“Surprisingly, at least the guys who have been in a corn/soybean rotation, have said they’re going to stay with that rotation. That seems to be where I pick up my best yields and that type of thing.”
However, he does expect a slight decrease in soybeans because of trade uncertainty. Still, he feels many producers will continue with “business as usual”.
Despite this, the USDA is forecasting about a seven million-acre reduction in their first estimates of the 2019 soybean crop.
Record Soybean Crop Stored
After a record crop, growers are trying to determine what to do with their soybeans after losing their largest export customer.
Fearful of economic failure, farmers are frantically trying to determine how to store a potentially 1 billion-bushel surplus until it can be sold at a decent price.
Farmers have remained patient with Trump and his plan. However, their wallets are beginning to feel the consequences of such patience. Even with relief programs Trump has set in place for soybean producers, they are still unable to breakeven.
Growers produced a record harvest of 4.6 billion bushels this year. Unfortunately, the USDA reported China exports were down 94% due to trade conflicts. Though other soybean export markets have surfaced, they still have not matched the losses incurred with the China trade war.
Therefore, more beans are going into storage than normal. This could have lasting effects and impact prices for 2019.
“The real pressure will come in February and March when farmers are trying to bring in some cash … to pay off bank loans and operating loans for the 2018 crop,” said Josh Gackle, who grows soybeans, corn, wheat and barley near Kulm, North Dakota. He said bankers could hesitate to finance another year if soybeans are still selling at unprofitable prices.
Bin space continues to fill and farmers have resorted to storing beans in bunkers with plastic wrap. Some are storing them outside, on the ground, in large plastic bags.
Storage methods have become innovative, but what does this mean for 2019 prices?
Given the impact of trade conflict on soybeans and the excess 2018 supply, soybeans may see a decline in 2019. Instead, farmers may turn to wheat for the upcoming season. Oppositely, some agronomists believe soybeans will only see a slight decline and business will continue as usual. As trade negotiations continue and we quickly approach the new year, producers will continue to finalize their decisions about what they’ll put in their fields for the next year.
Image courtesy of South Dakota Soybean