The Wheat Hype Goes Cosmic: Corn and Soybeans Must Compete for Acres in 2007-2008

Wheat is nowhere here!  That was the retort of a corn researcher who was giving your loyal scribe a tour around Champaign Illinois last week.  Most of the gathered Ontario farmers shook their head and looked around.  In Ontario wheat is almost as common as oxygen.  No, we can’t get those 250-bushel Champaign corn crops.  However, 100-bushel wheat in Ontario with wheat futures in rare territory surely turns heads.

For those of you watching the corn markets looking for an acreage war, it’s already over in Ontario.  If we get any type of planting window, Ontario farmers are set to plant wheat like its Kansas.  It’s almost like Dorothy, the Tin Man the Wicked Witch and Toto have found a new home.  Expect Ontario farmers to push 1.5 million acres of wheat this fall.  I’ve even heard 2.0 million acres bantered about.  Can’t see that.  If that happens, we’ll surely need a tornado to prop up an already anemic new crop wheat basis.

For the guys in the wheat pits, it’s like the millennium new year in September.  While corn and soybeans are the sexy agriculture commodities, wheat seems always to be the poor boy, always relevant, but nobody really wants to talk about it.  Last spring I was quoted as saying I don’t care if wheat goes to $100/bushel, I don’t have any.  The wet fall of 2006 took care of that.

If you doubt the wheat acreage figure for Ontario, think again.  I’ll be harvesting soybeans in two weeks.  Every acre I put behind me will be a pleasure.  That’s because I’ll be replacing 25 bushel/acre soybeans with hopefully 100-bushel wheat at $5 plus cash prices.  With the memory of the driest Ontario summer in 50 years in my back pocket, the faster I combine those soybeans and plant the wheat the better.

The increased wheat acres will take corn acres in Ontario down.  In fact the stampede away from corn at this point for 2008 is palatable.  With oil prices high, but ethanol prices low, you can see some type of train wreck coming, especially in Ontario.  In late 2008 and especially in 2009 Ontario ethanol capacity will finally “meet the red dog”.  If corn acres dip back to 1.5 million acres or even lower, basis will be on testosterone.  However, getting there from here seems like such a long road.

The road to $8 wheat futures was a long and winding road.  It started last year when wheat burned up in Australia.  That was followed by production problems in Europe and the Black Sea region of Eurasia.  It’s not a “demand driven market” like corn.  The current wheat price spikes are all about supply.  At a certain point, that will be filled again, but it’ll surely take some time.  Unlike corn, wheat is produced almost everywhere.

So what’s going to happen next?  I dunno, but the media hype on wheat is probably at fever pitch, somewhat like corn last spring.  What happened to corn then?  Boom; corn futures prices plummeted down over a $1 in about three months.  We’ll see what happens in wheat.

Low farm gate prices for corn, wheat and soybeans have become “the norm” in our greater society.  That’s one reason we see “alarm” in consumer circles when prices get into rare air.  The media hype in wheat right now is partly directed toward the ultimate threat of higher bread prices.  The media hype with corn in 2007 is the debate between “food and fuel.”  With prices at elevated levels global society is starting to engage in this debate.  Our American friends are somewhat isolated from it by the US Farm Bill.  However, every Canadian farmer knows our government will “throw us under the bus” before they let food prices go higher.  The cheap food policy has to be protected.

I haven’t even mentioned the “Canadian Wheat Board.”(CWB)  For my western Canadian readers, that surely strikes a cord.  Our Conservative government was set to emasculate the board first with barley, and then I assumed wheat.  However, a court decision broadsided that and the CWB kept its monopoly powers intact.  With wheat prices currently in the stratosphere and western growers waiting for their money from the CWB, you’ve got to believe the CWB vultures are circling.  Needless to say it’ll take an act of parliament to end CWB power. Stephon Dion, the Liberal opposition leaders sat beside me last month and said never.  In fact he said he’d defeat the government on the issue if it came to that.

So wheat is a big deal now.  Paul Penner, a one-time DTN reader of this column in the largest wheat producing state of Kansas must be in heaven.  In fact my many, yes many, Kansas readers must be on cloud nine.  The hype in wheat seems endless.  So let the acreage war begin.  It might be already over in Ontario, but it’ll surely be waging all winter.  Corn and soybean growers should be thankful.  Without wheat in the 2007-08-crop year, their world would be a lot less interesting.