While grain-based foods as well as futures and cash markets have been well aware that wheat production will be reduced this year, in contrast to the surge in 2008, the initial winter wheat crop forecast last week sounded a warning that should be heeded. At 1,502,074,000 bus, the prospective outturn is down 20% from last year, reflecting the 9% cutback in seeding last fall and 14% drop in prospective harvested acreage. Along with the impact this production cut will have on the supply-demand situation is the willingness of farmers, in response to a sharp fall in wheat prices, to slash production.

This is the message deserving the attention of grain-based foods executives concerned not just about this season’s wheat and flour costs, but long-term prospects for their industry and its need for a reliable supply of the bread grain. Farmer incomes and farmland values have suffered sharp declines this year. As prices firmed, these values stabilized, but still were below levels encouraging investment.

A farm rebound requires strengthening of domestic demand from recovery in the U.S. economy, including aspects of food demand that have been negatively affected by the recession. But it’s not just improved domestic business that agriculture needs. It also is currently feeling the weight of the worldwide economic slump, which has curtailed growth in global food consumption. With many doubts on a possible return to the price heights of 2008, a close watch should be maintained on how wheat farmers react to this new reality.

This article can also be found in the digital edition of Milling and Baking News, May 19, 2009, starting on Page 4. Click

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