By Julie Ingwersen
CHICAGO (Reuters) – A Biden administration drive to increase U.S. wheat plantings after the Ukraine war is faltering as wheat prices hover around four-year lows and exportable supplies continue to flow from the Black Sea region, curbing demand for American grain.
Wheat acreage expanded last year as prices soared to a near record high after Russia’s 2022 invasion of Ukraine. But U.S. plantings dropped nearly 5% this year, resuming a decades-long trend that has coincided with a more recent slide in the U.S. share of the global wheat export market. Β
Farmers planting less wheat in the world’s No. 4 wheat exporter could be a concern for global markets as the U.S. Department of Agriculture (USDA) forecasts world wheat supplies will tighten to a nine-year low, and increasingly extreme weather creates more uncertainty for global production of the staple grain.
In 2022, U.S. President Joe Biden visited Illinois and praised farmers for trying to avert a wheat supply shortage triggered by war in Ukraine, a major grain producer.Β His administration also saw increasing wheat planting as a way to help lower food inflation.Β
To encourage plantings in the central United States, the administration turned to crop insurance – not for wheat, but for crops such as soybeans that could be planted immediately after wheat and harvested in the same year. In parts of the U.S. Farm Belt, it is the income from a second crop, grown later in the season, that makes winter wheat economically viable.
Insurance coverage on a second crop had been limited to farmers in the southern Midwest, but the USDA took steps to make policies more widely available.
While the expansion in crop insurance initially helped to make wheat more attractive, the initiative was overshadowed by a plunge in wheat prices between September 2022, when winter wheat planting decisions were finalized for 2023, and the following year, when farmers planted the 2024 wheat crop.
Benchmark CBOT wheat was trading at around $9 a bushel in late September 2022, and around $5.40 a year later. Futures closed on Tuesday at $5.30-3/4. [GRA/]
Jeff O’Connor, who hosted Biden in 2022 on his farm near Kankakee, Illinois, said crop insurance for double cropping reduces risks for farmers who want to add wheat to their rotations. But the measures had little impact on his planting decisions.
“My wheat acres are determined by rotation and occasionally marketΒ conditions,” O’Connor said. “Crop insurance availability for double crop doesn’t play into the decision, with the way that the rules for coverage works,” O’Connor said.
Double cropping can be highly profitable, but also risky, especially in the northern half of the country where autumn frosts might kill the second crop before it is ready for harvest. Crop insurance mitigates the risk.
Planting two crops a year is common in the milder climate of the southern Midwest, including the southern third of Illinois. The Biden administration’s goal was to expand the practice northward, into the heart of prime Midwest corn and soy farmland.
Farmer response has been muted, however.
“We’ve found American farmers in the central Corn Belt to be very, very reluctant to alter crop rotation patterns unless there is a massive profitability signal,” said Matt Herrington, director of commodity research for World Perspectives Inc, a research and analytical firm.
DOUBLE CROPPING
In April 2022, USDA estimated that double cropping, as well as a two-year increase in loan rates for food crops, would help U.S. farmers make up for up to 50% of the wheat typically exported by Ukrainian farmers and lower costs to consumers.
In fact, Ukraine’s wheat exports increased to 18.1 million metric tons in the 2023/24 marketing year, matching the country’s pre-war five-year average, USDA data showed. U.S. exports dwindled to 19.2 million tons, a 52-year low as Plains drought drove up U.S. wheat prices to uncompetitive levels.
In the current marketing year, the USDA forecasts a decline in Ukraine’s wheat exports to 13 million tons as the war drags on, while U.S. wheat exports are expected to recover slightly to 22.5 million tons as better yields help offset the smaller planted acreage.
A USDA spokesman said farmers had responded strongly to expanding double-crop insurance in more than 1,500 counties, with a significant increase in winter wheat acres in 2023.
For the 2024 harvest, the USDA estimated a 4.7% reduction in total U.S. wheat plantings to 47.24 million acres (19.12 million hectares), due to a 7.9% drop in winter wheat acres led by declines in top producing state Kansas, as well as Illinois.
Double-cropping can boost soil health by keeping the ground covered for more months of the year. The practice could become more feasible farther north as the climate warms, and as seed technology improves.
Eric Miller, a central Illinois farmer, signed up for the expanded insurance for double-cropping. However, he did not change his wheat or double-crop soybean acres as a result, and instead stuck to his regular crop rotation this year.
“Obviously price and fall weather matters. (If) price per bushel is up, (wheat) acres will probably be up,” Miller said.
This post is originally published on INVESTING.
