It appears the market had its shot at higher wheat prices and missed. Oklahoma and Texas prices peaked in October at about $4.80 per bushels. Current cash prices are in the neighborhood of $3.45 to $3.50 per bushel.
Market signals indicate June 2003 wheat prices in Oklahoma and Texas will be around $3 per bushel.
The $3 is derived from the Kansas City Board of Trade July wheat contract price. At this writing, the KCBT July wheat contract price is about $3.40 per bushel. The average June basis is about a minus 35 cents, thus the expected price, using the KCBT July wheat contract, is $3.05 ($3.40 - $0.35 = $3.05).
Some producers are taking advantage of the new hard white wheat incentive program (HWWIP) that may add 20 cents per bushel to their price. This program was announced in the Federal Registry on Feb. 3, 2003 and will be administered by the Farm Service Agency for the 2003 crop year through the 2005 crop year.
The goal of the program is to increase the bushels of hard white wheat. The general belief is that there is a market for U.S. hard white wheat in Southeast Asia and Northern Africa. All that is needed, it is believed, is sufficient quantities of hard white wheat.
To qualify for the 20 cent per bushel payment from FSA, producers must produce and deliver U.S. No. 2 hard white winter or hard white spring wheat. The wheat must be used for export or domestically used for flour or seed.
The wheat cannot be used for feed.
Sign-up for the 2003 hard white wheat incentive program was scheduled to begin March 3, 2003. Producers will receive an incentive of 20 cents per bushel for up to 60 bushels per acre.
The hard white wheat must be U.S. No. 2 or better. U.S. No 3 grade or lower wheat will not qualify for the incentive program. Producers who use certified seed may also receive an additional $2 per acre.
The hard white wheat incentive program is based on no more than 2 million acres in the United States. Reports indicate that 327,227 acres were planted for the 2002 crop and 677,513 acres have been planted for the 2003 crop.
Kansas producers planted the most acres at 325,000, compared to 100,000 acres in 2002. Colorado was second with 127,070 acres, compared to 75,200 acres in 2002.
Oklahoma's hard white wheat acres increased from 3,975 acres in 2002 to 30,000 acres in 2003. Texas had 205 acres in both 2002 and 2003.
Before producers plant hard white wheat, they need to locate a buyer and determine a delivery point. One problem will be commingling hard white and hard red wheat. To qualify for the 20 cent incentive, the hard white wheat must grade U.S. No. 2 or better as determined by the Federal Grain Inspection Service.
Hard red wheat is considered a “contracting class.” If more than 2 percent hard red wheat is present in hard white wheat, the grade will be U.S. No. 3 or lower and the wheat will not qualify for the 20 cent premium.
It is important that producers raising hard white wheat keep it pure by making sure fields are not contaminated with hard red wheat and that equipment is cleaned before harvesting.
To grade U.S. No. 2 or better, hard white winter wheat must also be 58 pound test weight or higher, have no more than 4 percent damaged kernels, and no more than 0.7 percent foreign material (rye).
Twenty cents per bushel plus $2 per acre for using certified seed might be an attractive alternative for planting and producing hard red winter wheat. Also cleaning up fields and learning how to produce, harvest and deliver U.S. No. 2 or better hard white wheat might allow producers to position themselves as leaders in the wheat industry and get paid for it too.
Dr. Anderson is an economist at Oklahoma State University in Stillwater. Readers may call 405-744-6082, or e-mail [email protected] .