Planting intentions report indicates potential spring wheat acre increase

(Farm & Ranch Guide) – The big day the market was waiting for – when USDA released its 2013 Prospective Planting Report – came on March 28 and it was coupled with the quarterly stocks update. For spring wheat the result was a bit bearish due to higher corn stocks and an expected increase in 2013 hard red spring wheat plantings.

“One of those reports – the quarterly stocks estimate – is more important from an old crop perspective; and the prospective planting report is more important from a new crop perspective,” said Jim Peterson, marketing director for the North Dakota Wheat Commission.

“Unfortunately for the market it was construed as quite bearish. Corn moved to limit down which was a full 40 cent drop, so that pretty much negated the improved market run we’ve had since the middle of March,” he said.

The sole rationale for that, he explained, was the USDA stocks estimate for corn came in significantly higher than a lot in the trade were expecting.

“The rationale is that either the 2012 corn production has been understated, meaning we produced more bushels last year than the survey was showing, or demand is weaker than a lot of analysts had been projecting,” he said.

“In all reality, time will prove as we go forward if there are really that many stocks available – until we get new crop supplies coming. That was the main catalyst for setting the market back,” he added.

There were also more stocks than analysts had expected for wheat. Peterson suggested feed use of wheat may not have been as robust as some had been anticipating in recent months.

“The stocks estimate was kind of a surprise,” he said.

As a result of the reports, cash prices dropped back to the $7.30-$7.50 range with an average of $7.40. Nationally, hard red spring wheat had started to reach the $8 level at $7.87 on March 26, just a couple days ahead of the report.

“At the end of February we had hit $7.56, so we had a 30 cent recovery since that time,” Peterson said. “Since the USDA report we’ve fallen back 35 cents. The one day of the report negated all of the price gain we had made.”

Going forward into April Peterson feels there are some big factors that may help the market gain back some of the losses. One factor is the continued heavy snowpack and cool temperatures across southern Canada and Northern Plains of the U.S. and what impact that will have on planting.

“We know planting will get a late start this year, but it depends just how late and how many unplanted acres we’ll have. That could be a positive price factor,” he said.

The other factor is some concerns over recent cold temps in the southern hard red winter wheat region at the end of March. Some temps were down to 15 degrees as far south as Oklahoma and Texas.

“The crop is progressing in maturity so there is some concern the crop was far enough along in development to have had some damage,” he said.

Another supportive factor is export demand. The U.S. is starting to see an improved sales pace though much of the demand has been for hard red and soft red winter wheat as they are less expensive classes of wheat.

Overall wheat exports as of mid March were at 929 million bushels which is down from 934 million at this time last year. Sales are at 91 percent of USDA’s goal of 1.025 billion bushels. “So it’s definitely not negative toward the market,” Peterson said.

Hard red winter wheat exports are at 347 million bushels, up 2 percent from last year but only 87 percent of USDA’s goal for year.

Hard red spring wheat is at 217 million bushels compared to 232 million a year ago – a 6 percent drop. But on a positive note that’s already at 96 percent of USDA’s goal for the year. There could be higher export projections for spring wheat in the April supply and demand report.

Those were factors affecting old crop. Now the planting intentions report is the first snapshot of what 2013 planted acres may be.

According to the report U.S. producers are planning to plant 12.7 million acres of hard red spring wheat – up from 12.3 million in 2012.

“That’s somewhat in line with what we have been hearing, which was that spring wheat had a chance to be higher,” Peterson said. “But it’s somewhat of a surprise to market analysts who had been expecting about 12.5 million acres and even as low as 11.9 million, so it’s slightly stronger than anticipated.”

The biggest potential is in North Dakota where spring wheat acres are at 6.2 million, which is 450,000 more than last year, an increase of 8 percent.

Other states range from unchanged to up or down two percent.

“North Dakota has the potential for the most significant change in production,” Peterson said.

“The reason many analysts were looking for a drop in spring wheat acres was they were simply looking at the economics of corn and soybeans versus wheat and automatically presuming everyone was going to plant corn or beans if they could.”

Where spring wheat gained was against durum in northwest North Dakota and also to a degree against canola and barley in some areas.

“In some areas where producers looked at potential new crop prices for corn relative to spring wheat, spring wheat was still showing less potential price drop,” he said.

But as in any year, Mother Nature can be the big variable in the room, Peterson stated.

“Right now there’s a lot of debate as to how soon we’ll get in the fields in the region. If it gets to be later than normal, it’s a question of which crops will lose out in acres and which will win out,” he said. “There are a lot of scenarios favorable for spring wheat to hold to that number, but also in other areas of the region it would work against spring wheat acres.

“Time will tell. Nonetheless, based on the March planting estimate, it looks like spring wheat remains a pretty competitive crop for growers in the region.”