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Price Begins to Ration Short Wheat Crop

posted on September 13, 2002


Dozens of pork producers are suing Tyson Foods Inc. claiming the giant meatpacker deserted them with its recent restructuring.

Last month Tyson announced it would close its company-owned and leased hog farms and immediately terminate contracts with more than 130 hog producers in Arkansas and eastern Oklahoma.

Not just the litigants will be watching the company's restructuring. Currently, much of the livestock industry is not operating at a profit and the recent rise in grain prices doesn't help the bottom lines of any part of the meat sector.

Ironically the benefits of rising grain prices may well be escaping grain producers as well.

Price Begins to Ration Short Wheat Crop

The nation's corn harvest is just getting underway. Most of the activity is in the southern part of the Corn Belt. Early reports indicate yields as expect will be well below last year. If USDA projections hold the 2002 harvest will be the lowest in 7 years.

Thursday's USDA crop estimate dampened markets a bit, as the projections were nearly identical to the government's guess. The corn harvest is expected to produce 8.49 billion bushels, the soybean harvest 2.66 billion bushels. Notably though the prices could be pressured higher as the government anticipates ending supplies will be tightened by continued strong demand.

That scenario is certainly true in wheat country, where farmers are experiencing anemic yields and watching prices soar as world demand searches for dwindling supplies.

It is a situation that as Market to Market analyst Doug Hjort explained last week has been hidden by years of bountiful harvests and ample stockpiles.

Hjort: "… the rally is base on solid fundamentals. These are fundamentals that have been in place for a long long time. We know that demand is strong for all grains worldwide, but so far production has been high enough to offset that increasing demand. This year with production down in several major countries, we're seeing the price rally sharply."

Perhaps the biggest beneficiaries of the trend are wheat producers in the Pacific Northwest. Prices for the soft white varieties grown there broke through the 4 dollar a bushel level for the first time in five years. Nearly 90 percent of the region's crop is exported. While total U.S. wheat production will be down 12 percent this year, the lowest output in 30 years, production in the Pacific Northwest is projected to be about 8 percent higher this year.

 


Tags: agriculture corn crops markets news weather wheat