Wheat Feeding to Decline Over Next Year
The world’s glut of wheat has been slowly disappearing into feed channels. While wheat supplies are still heavy, by 2013 some analysts think wheat prices could, once again, reflect the human food market, rather than the animal feed market.
Greg Kostal, president of Kostal Ag Consulting, in Winnipeg, notes that for the 2011-12 crop year, an extra 1 million metric tons of wheat in Canada will have made it into animal rations. "In Canada, like the rest of the world, wheat has found its way into feed channels to help fix a tight corn situation globally and a tight barley situation in Canada," Kostal says. In total between 4 million and 4.5 million metric tons of wheat will be fed to livestock in Canada in the current crop year.
Kostal expects world ending stocks of wheat to begin to trend lower. "Wheat has been cheap for the better part of a year," Kostal says. "Wheat cannot be fed with such aggression around the world indefinitely." Wheat prices have been so low compared with corn and barley prices that even Durham wheat has made it into livestock rations in Canada.
Kostal predicts that sometime in 2013, the global wheat supply will begin to move away from being priced as an animal feed and back toward being priced for human consumption based on his expectation that world wheat stocks have peaked.
Charles Soule, market analyst with Country Hedging, Saint Paul, Minnesota, cautions that even if wheat prices start tracking the food market, it doesn’t mean wheat prices will increase. As corn stocks begin to build, Soule says that corn prices will likely drop below wheat prices.
That could return the traditional premium to the wheat market. Traditionally, Soule says that Chicago wheat carries about a 30-cent premium to corn, while Kansas City wheat has a 50- to 60-cent premium. On May 8, 2012, the July corn contract settled near $6.23, but Chicago wheat was actually 8 cents lower at $6.15. The same day, Kansas City wheat closed near $6.36, only 13 cents higher.
Canada is on track to produce an all wheat crop of between 26 million metric tons and 27 million metric tons, Kostal notes, but planting has slowed. Unlike wheat planting in the northern plains of the United States, planting in Canada has stalled. "Saskatchewan has had a lot of rain," says Kostal. "There is a need for a drier weather pattern to achieve an optimal planting pace." The prime planting period for Canada’s western prairies is May. "We do not have the early planting outcome like North Dakota has had," he adds.
As of May 6, North Dakota had 82% of its spring wheat crop planted, compared with a five-year average of only 37%. South Dakota’s crop was 100% planted, and the U.S. spring wheat crop was 82% planted, compared with an average of 49% for the first week in May.
For More Information
See AgWeb's Spring Wheat Planting Map.
