Agricultural News
Formidable Weather Creates Potential Opportunities for US Wheat Market Both Domestically, Globally
Wed, 12 Jun 2019 12:16:51 CDT
The USDA released its latest Crop Production report this week in which the agency increased the predicted size of the 2019 Oklahoma Winter Wheat Crop by six million bushels compared to its May 2019 prediction, estimating it at 111 million bushels based on three million harvested acres and a 37 bushel per acre yield. Realized, this crop would be 58 percent larger than the seventy-million-bushel crop produced by Oklahoma farmers in 2018, one of the worst crops in recent memory. Executive Director of the Oklahoma Wheat Commission Mike Schulte, in an interview Tuesday with Radio Oklahoma Ag Network Associate Farm Director Carson Horn, says he concurs with the USDA's estimates in this report.
"I think that they are probably right in line with what we're seeing," he remarked. "No doubt, predictions of the crop are a little bit more than what they were this time last year given the drought conditions that we were coming out of. But moving forward, I think it's important to note we still have the lowest amount of acres planted since 1909 and I think the market has started to react to that knowing that we've gotten into a weather market in the Southern Plains over the last few weeks."
Schulte adds that concern continues to mount in the marketplace over the ongoing struggle to plant corn, how that will factor into the cost of feed and whether or not any opportunity will arise for the wheat market out of that situation.
"I am a little bit more optimistic than I was a month and a half ago," Schulte said. "I think there could be potential we might have a relatively decent crop for producers and maybe there's going to be some price opportunities."
In addition to those potential opportunities, Schulte says globally, the crops of major wheat producing countries like Canada, the EU and Australia are all suffering from dry conditions. Russia is another also dealing with this issue and has indicated that it will likely not produce as much as it has the previous two years which has allowed it to dominate the global wheat market. This is unfortunate news for them, but good for US producers who have grown cautious of Russia's encroachment on US market share around the world since raising its profile as a major exporter of wheat. In particular, it is no secret that Russia and other exporters like Argentina are eyeing Mexico - one of the top markets for the US wheat industry.
"We continue to face increased competition - from Russia specifically - in Africa and Middle East which are traditionally large buyers from us. There are times in the marketplace where Russia can be more cost competitive than us when it comes to taking wheat into Mexico," he said. "They haven't been as successful in doing that because of our proximity to Mexico, but we do know they would like to get their foot in the door there. So, we are trying to be proactive in our relationship with Mexico and working with them to provide them better products that fit their needs for their region and their markets."
An example of that effort happened just recently with Schulte representing the OWC, along with the other 17 member states that make up the US Wheat Associates, travelling to Mexico to attend the Mexican Wheat Trade Conference to strengthen the relationship between the US wheat industry and Mexican millers and bakers. Schulte reported that most of the discussion that took place during the conference centered on tariffs imposed by President Trump to coerce the Mexican government to address its immigration issues, which have since been nixed after the two governments came to an accord last week. Schulte says it is fortunate that the strategies discussed are no longer needed to continue to market to Mexico, but insists it was nonetheless beneficial to renew their respective commitments and build upon the existing relationships that he hopes will prevent Russia or other competitors from stealing US market share in Mexico.
"A lot of our success has been due to proximity - but it also has a lot to do with the fact that they like the quality of the wheat that we provide," he said. "So, we just felt like it was important to have that dialogue in case something like the tariffs did arise to make sure we could work around that. There was also a lot of discussion on where we'll be 10 to 20 years from now in regard to rail and elevator infrastructure and what we can do to be successful in continuing that relationship and provide them the best quality wheat."
Listen to Schulte's full conversation with Horn, by clicking or tapping the LISTEN BAR below.
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