What is in this article?:
- Wheat and other grains have promising future
- Vying for markets
The U.S. wheat industry needs to be more competitive to maintain or gain market share.
EXTENSION ECONOMISTS Mark Welch, left, and Bill Thompson, talk about wheat and farm bill during a break at the recent Big country Wheat Conference in Abilene.
Mark Welch, Texas AgriLife Extension grain marketing economist, says it’s a good time to be in the grain business.
Even with current price declines brought on by burdensome supplies, Welch sees a continuing trend for growing demand for wheat and other grains well into the future as populations grow and consumers look to improve diets.
He cites population growth of 1 percent per year and “no indication that the trend will be backing off. We’ve seen an increase in grain consumption over the last few years. Demand for grain is strong in the world and in the United Sates,” he told participants at the recent Big Country Wheat Conference in Abilene. Current low prices may be “short-term.”
Projections for May 31, 2015 indicate a 100-day supply of wheat on hand. “That’s a comfortable supply,” Welch said, “not tight but not burdensome.” Corn supply is expected to be at 71 days, also comfortable. Soybeans at a 110-day supply will be ‘an all-time record high but large stocks are held by China and market response is limited.
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“Rice is worrisome,” he said. “Stocks are building but next year stocks tip down a little.”
Welch said the United States retains a competitive advantage in the export market, primarily because of our reputation as a consistent producer and for our superior wheat quality.”
Competitors include Canada, Australia and Russia, and key import markets include the Mideast, Africa and Southeast Asia.
“China has a large crop; Brazil has a large crop and usually buys wheat from Argentina. Argentina’s crop was down so Brazil had to come to the United States. Short-term, that was an advantage, but with a better Argentine crop, Brazil will buy less from us.
The U.S. wheat industry needs to be more competitive, Welch said, to maintain or gain market share. “We need to get our production costs down. Our climate is getting hotter and drier so we face a challenge to continue maintaining our reliability and quality.”
Even with a growing population and increased demand, U.S. producers need to reduce production costs without sacrificing yield and quality. He compared U.S. production to countries of the Former Soviet Union. “Yields are increasing in both places,” he said. U.S, average wheat production is 45 bushels per acre; the FSU countries average 30 bushels per acre.
“They have a higher degree of production variability, but occasionally they will have a good production year and come in and challenge for market share.”
Current downward price pressure, Welch said, has little relation to production in the United Sates. “Production here has changed little but production for other countries has increased. The European Union is getting larger and larger and China and the FSU have also increased production.”