Columbus, Ohio
October 16, 2007
Historically high futures prices
are enticing crop producers to plant more wheat and soybeans
next season in order to boost the current shortage of both
commodities.
Matt Roberts, an Ohio State
University Extension agricultural economist with the
Department of Agricultural, Environmental, and Development
Economics, said that the futures price of wheat is around $6.75
a bushel, nearly $3 more than the historic average, while the
soybean futures price is over $9 per bushel.
“If we looked at the 1996-2006 crop years on average, we would
expect wheat futures prices to be around $3.50 or $3.75 per
bushel,” said Roberts. “At the same time, we have seen a price
response in the soybean market to stimulate more plantings. The
market is auctioning off plantable acres across the three
commodities: corn, soybeans and wheat. Prices are rising in each
of those crops to try to bid acres into those crops, and
soybeans and wheat are where we are seeing the sharpest
response.”
The corn futures price is at $3.95, compared to $4.20 last year,
and is still running high due to continued demand in ethanol
production. Corn production in 2007 was the highest since 1933,
and as a result, producers planted 11 million fewer acres of
soybeans, according to the U.S. Department of Agriculture. A
smaller production coupled with increased usage has resulted in
an inventory shortage that the markets are trying to rectify,
said Roberts.
“This year we used 300 million more bushels of soybeans than we
produced, out of a total production of three billion bushels.
That’s not a sustainable model,” said Roberts. “Analysts are
already worried about availability for next year, so the soybean
market is looking for acres.”
Wheat inventories are also low, due to low yields in the United
States and around the globe. As a result, current physical
delivery wheat prices are sitting at a record-high $9 per
bushel.
“The wheat market has become tight, and no wheat is being fed
anywhere at that price,” said Roberts. “There’s just not much
wheat available right now around the world, which has sent
prices to extreme levels, and U.S. wheat inventories will be
very low based on strong export demand.”
Roberts indicated that if current U.S. wheat projections hold
true come next spring, inventory could be the lowest since 1948.
“The small inventory is not only driven by disappointing yields
in the U.S., but also low yields around the globe. Canada, South
Eastern Europe, South Africa, Australia, have all seen
lower-than-normal wheat yields.”
Ohio growers are expected to plant an additional 250,000 acres
of wheat this fall. Nationally, demand for wheat has increased
to such an extent that little seed is available, especially
throughout the eastern Corn Belt.
“The high wheat prices have created such a demand for seed that
it’s almost impossible to find wheat seed in the eastern Corn
Belt,” said Roberts.
According to the latest USDA crop production report, 2007 corn
production is forecast at 13 billion bushels, 26 percent higher
than last year, and the largest on record. Yields are expected
to average 154 bushels per acre. If realized, it would be the
second highest yield on record. In Ohio, growers planted 3.8
million acres of corn, but only harvested 3.6 million, due to
weather-related conditions. However, growers increased their
production from last year by over 70 million bushels. Yields are
expected to average 150 bushels per acre.
Soybean production is forecast at 2.6 billion bushels, down 19
percent from last year. Yields are expected to average 41
bushels per acre. In Ohio, growers planted 4.6 million acres of
soybeans, but are only anticipated to harvest 4.1 million.
Production was down by 27 million bushels from 2006. Yields are
expected to average 46 bushels per acre, higher than the
national average. |
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