New corn hybrids take wheat area

by Morton Sosland
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In light of current broadly accepted analyses that describe the current global wheat supply situation as adequate, even generous, to meet both domestic and export demand, the timing may not be favorable for voicing concern about future wheat sufficiency. Yet, recent disclosures by the world’s leading producer of corn seed stock about research aimed mainly at making the feed grain attractive for growing on land that has been devoted for years to wheat signal developments that may not be neglected. Indeed, that is particularly the case in a crop year like this when global wheat production, although off a bit from the prior year’s record, is of a size to allow for a generous carryover.

It was Michael K. Stern, vice-president of Monsanto Co., who told a BMO Capital Farm to Market Conference of the progress the company has made in producing drought resistant, short maturity corn that has become popular in Western and Eastern Europe as well as in Russia, where it is meant to replace acreage long planted to wheat. These hybrids were developed with the initial goal of replacing wheat in western Canada, but their success in the prairies opened opportunities in Europe.

Noting that Monsanto has identified Eastern Europe as a high growth area, Mr. Stern estimated that between Ukraine and Russia “there is about 30 million acres of corn opportunity.” That area planted in corn would be equal to creating another Brazil. He said that activity in this part of Europe resembles what happened in recent years in South and North Dakota, where corn replaced large swaths of wheat. ”As we drive productivity in corn, as we drive corn yields higher based on new germplasm, we’re seeing that shift from wheat acres to corn acres,” the executive said.

Unnecessary as it may be to tell America’s grain-based foods industry what the shift from wheat has meant, recent events emphasize how much is at stake. Many reasons may be cited for the astounding premiums that Kansas City wheat futures (the only hard red winter contracts) have attained, but none is more important than the impact attributed to the shift out of wheat. Hardly anything says it better than the dominance of corn in Kansas. The reduced wheat presence in America, where it competes with the superior returns of both corn and soybeans, also reflects very small gains in wheat yield. This difficult situation would be exacerbated by similar shifts in Canada and Eastern Europe. Both are competitive suppliers to international markets, and any reduction in export availabilities could be a real setback.

Returns to U.S. corn farmers, which are measured by the U.S. Department of Agriculture, have been at $100 and higher per planted acre in four of the past six years. The peak corn return was an astounding $224 in 2011. These returns are calculated by deducting from the value of production total economic costs. Contrast these results with similar calculations for wheat where returns in only one of the past five years were even positive, and that was $40.70 per planted acre on the 2012 crop, or less than a fifth of corn’s peak. Corn’s gross value per planted acre in 2013 was $725, against $276 for wheat, while total costs were $676 and $312, respectively. On last year’s crop, the value of wheat production less total economic costs was a negative $25 per planted acre. Corn’s value fell in 2013, but was hugely superior at a positive $48.

For many years, corn’s higher yield was a problem for wheat in only a limited area where the two crops could both be grown and prices made the two grains competitive. What protection that gave wheat is being overwhelmed by new corn hybrids specifically bred to usurp wheat. That is a threat that can only be sensibly answered in one way — boosting the yield of wheat. For the present at least, this means genetically-modified wheat.

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