By Julie Ingwersen
CHICAGO (Reuters) – A Biden administration effort to increase U.S. wheat plantings after the war in Ukraine is faltering as wheat prices hover around four-year lows and exportable supplies continue to flow from the Black Sea region, boosting demand for U.S. grain is slowed down.
Wheat acreage grew last year as prices rose to a near-record high after Russia’s invasion of Ukraine in 2022. But U.S. plantings fell nearly 5% this year, resuming a decades-long trend that coincided with a more recent decline in U.S. shares in the global wheat export market.
Farmers planting less wheat in the world’s fourth largest wheat exporter could be a concern for global markets as the US Department of Agriculture (USDA) predicts global wheat stocks will shrink to a nine-year low, and More and more extreme weather events create more uncertainty for the global economy. production of the staple grain.
In 2022, U.S. President Joe Biden visited Illinois and praised farmers for trying to avoid a wheat supply shortage due to the war in Ukraine, a major grain producer. His government also saw increasing wheat plantings as a way to help lower food inflation.
To encourage plantings in the central United States, the government turned to crop insurance—not for wheat, but for crops such as soybeans that could be planted immediately after wheat and harvested 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 for a second crop was limited to farmers in the Southern Midwest, but the USDA took steps to make policies more widely available.
Although the expansion of crop insurance initially helped make wheat more attractive, the initiative was overshadowed by a decline in wheat prices between September 2022, when winter wheat planting decisions for 2023 were finalized, and the following year, when farmers canceled the wheat crop plant before 2024. .
Benchmark CBOT wheat traded at around $9 per bushel in late September 2022, and around $5.40 a year later. Futures closed Tuesday at $5.30-3/4. [GRA/]
Jeff O’Connor, who hosted Biden in 2022 at his farm near Kankakee, Illinois, said double-cropping crop insurance reduces risks for farmers looking to add wheat to their rotations. But the measures had little impact on his planting decisions.
“My wheat areas are determined by rotation and sometimes by market conditions,” O’Connor said. “The availability of double-crop crop insurance is not a factor in the decision, given the way the rules for coverage work,” O’Connor said.
Double harvesting can be very profitable, but also risky, especially in the northern half of the country, where fall frosts can kill the second crop before it is ready for harvest. Crop insurance reduces the risk.
Planting two crops per 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 north, into the heart of the Midwest’s prime corn and soy farmlands.
However, the farmers’ response has been muted.
“We have found that U.S. farmers in the central Corn Belt are very reluctant to change crop rotation patterns unless there is a huge signal of profitability,” said Matt Herrington, director of commodity research at World Perspectives Inc, a research and analysis firm. .
DOUBLE CROPPING
In April 2022, USDA estimated that double harvests, as well as a two-year increase in lending rates for food crops, would help U.S. farmers offset up to 50% of the wheat typically exported by Ukrainian farmers and reduce costs for consumers.
In fact, Ukraine’s wheat exports rose to 18.1 million tons in the 2023/2024 marketing year, matching the country’s five-year average before the war, USDA data show. U.S. exports fell to 19.2 million tons, a 52-year low as drought in the Plains pushed U.S. wheat prices to uncompetitive levels.
For the current marketing year, the USDA forecasts a drop in Ukrainian wheat exports to 13 million tons as the war continues, while U.S. wheat exports are expected to recover slightly to 22.5 million tons as better yields offset smaller planted area help compensate.
A USDA spokesperson said farmers have responded strongly to the expansion of double crop insurance in more than 1,500 counties, with significant increases in winter wheat acreage in 2023.
For the 2024 crop, 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% decline in winter wheat acres under leading declines in the top-producing state of Kansas and Illinois. .
Double cropping can improve soil health by keeping the soil covered for more months of the year. The practice could become more feasible further north as the climate warms and seed technology improves.
Eric Miller, a farmer from central Illinois, signed up for the extended double-crop insurance. As a result, however, he did not change his acres to wheat or double-crop soybeans, but stuck to his regular crop rotation this year.
“Obviously, price and fall weather matter. If the price per bushel goes up, (wheat) acres will likely go up,” Miller said.
