October 30, 2014
US farmers switching to wheat for more profit
US farmers are growing more wheat because it offers "better bottom-line return than planting corn, milo or canola," as one farmer puts it.
Government crop-insurance programmes are also providing wheat with a better floor for revenue than other crops, according to news reports.
Dan O'Brien, an economist at Kansas State University in Colby, said that while Chicago wheatfutures are down 13% this year to US$5.255 a bushel, it's still above variable costs for most growers of about US$4.50, based on six years of farm-production data. In comparison, corn futures are down 14% to US$3.6425 a bushel, barely ahead of production costs near US$3.50.
Planting of winter wheat, which accounts for about 70% of all US wheat output, is expected to increase by 2.6% to 43.51 million acres, according to a report by Bloomberg.
In Kansas, the biggest US wheat grower, acreage may rise to a 17-year high, according to Jeff Kahle, the managing director for Kansas-based United Plains Ag Cooperative, which buys grains in western Kansas and Eastern Colorado.
Increased sowing in the US means bigger global glut, which was earlier forecast by the government at a three-year high. But it's good news for bakers, who now pay 5.5% less for flour than they did in January.