Grain Market Economist Kim Anderson Says Current Wheat Market Favors Quantity Over QualityTue, 14 May 2019 11:53:22 CDT
It has been a tough spring to be a wheat grower this year as prices continue to fall below breakeven levels. The good news, though, according to Oklahoma State University Extension Grain Market Economist Dr. Kim Anderson, is that current projections indicate a 70 percent increase in production which he says should more than offset the recent dollar decline in prices. During the recent Lahoma Wheat Field Day hosted by OSU, Anderson shared his advice with Radio Oklahoma Ag Network Farm Director Ron Hays about how farmers might best navigate the challenges present in the current marketplace. You can listen to their complete conversation by clicking or tapping the LISTEN BAR below at the bottom of the page.
At this time last year, wheat prices were hovering between $5.05 - $5.10. At present, farmers can only expect to command $3.85 - $3.90 for forward contracting their wheat at harvest delivery. With big enough yields, Anderson suspects farmers could potentially increase their margins enough to achieve breakeven levels.
“Production I think we’ll see as we go along - is going to become more important than price,” he said. “You can have an $8 price, but if you don’t have anything to see, it doesn’t do you much good. But… $4.00 wheat… that is very, very tough to get a breakeven out of.”
According to Anderson, there is not much in the way of premiums currently offered by the market at this time. Though, he asserts quality will be an important factor contending that while good quality may not earn you much more - poor quality will certainly expose farmers to the risk of being discounted.
Based on anecdotal evidence, Anderson says the overall quality of this year’s crop is expected to be fairly good. There is concern though that protein levels may not be quite up to snuff. Anderson believes those producers who took the initiative to put down nitrogen this year will probably benefit from it.
Higher protein levels has become the new standard anymore, Anderson says, dictated now by the changing dynamics in the global marketplace - led in particular by the major players in the Black Sea Region.
Anderson’s advice to farmers this year comes from a historical perspective. According to his review of the last decade or more - farmers who sold their wheat after August 30th have received a lower price than those who sold prior to that date for 10 of the last 11 years. His suggestion is to treat $4.00 wheat like $8.00 wheat given the current condition of the marketplace.
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