Wheat's Dismal 2010 Outlook

By now I'm sure we've all heard about USDA's January crop report and the unmerciful damage it did to commodity prices. Watching the price of wheat plummet with the price of corn was like watching a piano being shoved out a third-story window.

Any hope for prices to rebound is getting very, very dim, according to the latest market predictions. And frankly, its hard to disagree.

There are a couple of things, though, that can still give us a sliver of hope and a mild sensation that the end isn't quite near.

First, we planted 6.2 million fewer acres this year to winter wheat in the U.S. Acreage this year fell to 37.1 million - the lowest since 1913 – thanks to the horrible planting conditions we suffered through this fall. Sickly wheat prices didn't help much, either.

Shattered windshield Second, the hard freeze last week may have killed some of the wheat now in dormancy, which could potentially affect supply. Just how cold was it? When I was in Des Moines this weekend, temperatures dropped well below zero and completely shattered the back windshield of my car. With cold that severe, it's hard to believe anything can survive outside for too long.   

Crop losses this spring, though, probably can't be expected to be extraordinary. As is the case on our farm, snow cover buffered the temperature swings on the ground while ample soil moisture insulated the root system.  If we have any losses in the spring to winterkill, it's not likely to be anything to write home about. In fact, all indications are that we'll be going into spring with a very healthy crop.

Others without snow cover, though, may have fared worse.

Too much wheat And of course, there's the inescapable truth that the world's still choking on wheat.

USDA put year-end inventories in the U.S. at 976 million bushels - three times what it was two years ago. It seems like only yesterday we were running out of wheat, and now we're swimming in it.

It only gets worse overseas, in particular with the Russians who are rapidly catching up with the U.S. and will likely bump us from our standing among leading world producers. Russia's got wheat coming out their ears and they're selling at prices way below the U.S.

With that monster of a wheat seller to contend with overseas, it's hard to believe prices will come back anytime soon in the U.S. to a level above break-even. If that day comes, it certainly won't happen in 2010.

To take a line used by Chicago Cubs fans for decades: "There's always next year."