Mo. farmers face tough decisions on what to plant

JEFFERSON CITY, Mo. -- From massive shifts in global wheat trading to weather patterns, a confluence of circumstances is fueling a bullish agricultural commodities market that poses vexing questions about what Missouri farmers will grow this year.

With winter wheat crops nearly doubled in Missouri this year and with the U.S. Department of Agriculture already forecasting increasing demand for corn, soybeans and cotton, as well, market experts say farmers across the state will be forced to make tough choices about what crops to grow this year. In a planting survey beginning next month, the USDA will ask farmers across the country to declare their planting intentions so the nation can begin estimating what harvest may bring.

"Most of the ag commodities are suddenly in tight supply on the world market," said Arlan Suderman, a Kansas-based Farm Futures market analyst. "Typically you'll have one tight or another tight, but it's unusual for all of them to be tight at the same time."

It's a phenomenon that began last fall when U.S. farmers greatly increased winter wheat production. Across the nation, farmers have produced 301 million more bushels of wheat than last year. The move was sparked by droughts in the wheat producing areas of former Soviet Union and in China. Analysts predict the La Nina weather system will exacerbate harvest issues in these areas, fostering a greater reliance on U.S. wheat exports.

Record exports

This potential growth comes at the same time the USDA on Friday reported U.S. farm exports reaching an all-time high of $115.8 billion in 2010. Bulk commodities increased 19 percent to $47.2 billion, and consumer-oriented agricultural products increased 15 percent to $45.4 billion, the USDA said.

Soaring demand for U.S. food and agricultural products "is good news for all Americans in these trying economic times," Agriculture Secretary Tom Vilsack said in a news release. "Every $1 billion in agricultural exports supports 8,000 American jobs, which means agricultural exports supported nearly 1 million jobs in 2010."

And, Vilsack added, "For the first time, China emerged as the top market for U.S. agricultural exports, with $17.5 billion in sales. Canada was second with $16.9 billion."

The bullish export outlook has driven wheat futures to a 30-month high and increased planting across the country. In Missouri alone, winter wheat planting doubled from 370,000 acres last year to 750,000 acres.

But growing patterns are being complicated by a sharp rise in the demand for U.S. corn, used in everything from ethanol to feeding livestock. A USDA report released Wednesday suggests that the demand is so great that the 12.4 billion bushels of corn harvested by U.S. farmers last fall will decrease to just 675 million bushels before the next harvest season replenishes inventories. This leaves ending stocks at an estimated at 5 percent of annual usage.

It is unusual to see demand for both corn and wheat rise so sharply, noting that their price relationship is usually based on an inverse correlation, Suderman said. That, along with higher prices for soybeans and cotton has Missouri farmers faced with the challenging question of how to apportion crop land this year. Starting next month, the USDA's National Agricultural Statistical Service will begin its March Agricultural Survey to help gauge planting patterns for the upcoming growing season.

"Other grain prices weren't that high last fall, so winter wheat acres increased quite a bit," Suderman said. "Now all the crops have high prices. All the crops are trying to get more acres and there are only a limited number of acres in the United States."

The increasing global demand has also created a "bullish market" for traders of U.S. agriculture commodities, said Melvin Brees, a market policy extension associate at the University of Missouri's Food and Agricultural Policy Research Institute. Brees said the high prices were supported by a clear, strong demand, but warned that prices are still volatile and subject to risk.

"Depending on you view point, it's an exciting period of time or it's a very uncertain period of time," he said.

Experts agree that the global shortages underlying the commodity price increases are significant, but not as critical as shortages in 2008 that sparked food riots across the developing world.

But, as forecasters warily eye the drought in China and the potentially negative impact of the La Nina climate system on summer wheat crops, they say the situation could further deteriorate. This week, the United Nations Food and Agriculture Organization issued a warning that the China's drought could threaten nearly 40 percent of the country's total wheat crop, putting global supply at risk.

"People in developing countries spend a larger share of their income on staples, like corn and wheat," said Ephraim Leibtag, an economist with the USDA's Economic Research Service. "So they are the ones most directly impacted when there are shortages."

Leibtag also said food prices in the U.S. will also see a likely increase in the next two to five months, as the summer growing season begins.

"We don't see it now, but these prices will eventually reverberate and impact the price you and I pay for our food," he said.