US spring wheat seedings for harvest in 2008 are unlikely to rise much if at all, setting the stage for a rerun of this year's tight stocks situation for the high-quality wheat.
Unlike winter wheat, early forecasts show little change or even a drop in spring wheat plantings for 2008 - despite a surge in old-crop spring wheat futures on the Minneapolis Grain Exchange this month to record highs above $11 per bushel.
New-crop contracts representing the 2008 spring wheat harvest remain below $9. While historically high, the prices still lag what farmers in the Northern Plains wheat belt can earn by growing other crops.
"You have soybeans at $9.50 or $10 (per bushel), you have sunflowers and canola at over 20 cents a pound, you've got malting barley at nearly $6 a bushel - you just have a lot of competing crops for producers up here to choose from," said Mike Krueger, president of the Money Farm, a grain marketing advisory firm near Fargo, North Dakota.
"Based on overall price relationships, it seems to me it's going to be difficult to see much of an increase in spring wheat acres, either here or in Canada," he said. Consulting firm Informa Economics last week projected 2008 plantings of spring wheat other than durum (including hard red spring wheat and spring white wheat) at 13.0 million acres, trade sources said, down from 13.3 million last year.
"There are 'guesstimates' that spring wheat acres might be down, even at these prices, because the ROI (return on investment) of the other commodities is higher, durum and barley especially," said Steve Freed, an analyst with ADM Investor Services in Chicago.
Hard red spring wheat, which makes up 20 to 25 percent of overall US wheat production, is grown in the northern US Plains, planted in the spring and harvested in late summer. Milled into flour for bread, spring wheat typically commands a premium price because it has a higher protein content than winter wheat and can be blended with lower-protein wheat to raise overall quality. Once a mainstay throughout the Northern Plains, spring wheat has been losing acreage over the last decade as farmers seek better returns with other crops.
"There is some concern, especially from the mills who want as big a pull (in spring wheat acres) as they can get," a Minneapolis futures trader said. "It's not going to go up enough to ease tight stocks. Wheat is starting to pull a bit of farmer interest, but we're not pulling a ton of acres," the trader said.
The US Department of Agriculture has projected US all-wheat ending stocks for the current 2007/08 marketing year at 280 million bushels, a 60-year low. Of that, spring wheat stocks are forecast at 87 million bushels.
Farmers still have time to adjust their spring seeding plans this winter, gauging new-crop futures prices, seed availability and costs for inputs such as fertiliser. But market trends underscore the trade's concern about supply. MGE spring wheat futures contracts are mostly inverted all the way through September 2009, with nearby contracts trading at a higher value than back months.
Deferred futures normally trade at a premium to nearbys, due to the cost of storing grain over time. But markets invert during times of strong end-user demand. "It's going to be a situation where quality wheat will trade at a premium, and it will remain scarce," said Gavin Maguire, analyst with Iowa Grain in Chicago.
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