Kansas' winter wheat crop off to good start amid fall rain; state's farmers await USDA's monthly crop report Nov. 9 to see how global supply affects prices

WICHITA, Kansas , November 8, 2011 () – Fall rain has helped get Kansas' winter wheat crop off to a good start, and now farmers are waiting to see what happens Wednesday when the U.S. Department of Agriculture releases a report on the wheat supply worldwide.

More attention is being paid to such reports because wheat prices have been volatile, said Aaron Harries, marketing director for the industry trade group Kansas Wheat. Last month's report depressed wheat prices because it estimated the global grain supply was greater than had been expected for this marketing year.

"The last report surprised people," Harries said.

Although the Agriculture Department reduced its estimate for U.S. wheat production, that was offset by markedly lower exports and lower estimates of the amount being used to feed livestock, according to Kansas State University's grain market outlook analysis.

Kansas State University economist Dan O'Brien said analysts expect the November estimate for the world wheat supply to be down marginally.

"We will be watching USDA projections for a lot of the wheat exporting countries — particularly looking at Australia, Canada, watching what happens in Europe in regards to their wheat crop, the Black Sea area — all those things are in play," he said.

Wheat is more abundant in both domestic and world markets than corn and soybeans. One of the things pushing up its price now is the tight corn supply. Most wheat is used for human consumption as flour or other foods, while the majority of the corn grown is used to feed livestock and supply the ethanol industry. But when corn supplies are as short as they are this year, demand for wheat to feed to livestock comes into play.

Corn stocks are at the tightest level they have been since the 1970s, O'Brien said. Although corn production is high, the world harvested a billion fewer bushels of corn than analysts had expected last spring while demand remains strong from livestock feeding, ethanol and export markets.

"You have an interaction between the continued tightening of corn supplies and the search for alternative feed stocks, and really that would be wheat," O'Brien said.

The Agriculture Department dropped its projection last month of how much wheat was being fed to livestock domestically from 240 million bushels to 160 million bushels, surprising analysts given how tight corn supplies are, he said. Market analysts will be taking a close look at this month's estimate of the use of wheat for livestock feeding.

In Kansas, the use of wheat as a livestock feed has been "very limited," Harries said.

"That was more likely when corn and wheat prices were a little more equal than they are right now," he said. "I would doubt seriously if you are seeing much wheat feeding going on."

Corn prices on the commodity futures market for December ranged between $6.50 and $6.70 a bushel Tuesday, compared to hard red winter wheat prices of between $7.25 and $7.50 a bushel on the Kansas City Board of Trade, O'Brien said.

It is a lot easier to predict the price of wheat for March or April 2012 from this year's crops than it is to predict it for July 2012, when the new winter wheat crop is harvested. That's because the crop now in the ground needs rain. The summer drought left the central Plains with little, if any, soil moisture in the ground for it to draw on.

Despite the fall rain, a large swatch from southwest and south-central Kansas all the way to southern Texas is still in an extreme drought, according to the U.S. Drought Monitor.

"We will still be dependent on rainfall come spring to bring the crop to fruition," O'Brien said.

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