History, weather and the allure of high cotton prices suggest that American farmers did not turn to winter wheat as enthusiastically as many believe, a veteran US analyst has said, on the eve of one of the key days in the farm commodities calendar.
Market-watchers on average believe that US Department of Agriculture will, when it releases a cluster of key reports on Wednesday, estimate that domestic winter wheat sowings for this year's harvest jumped by 3.6m acres to 40.9m acres as growers scrambled to cash in on high prices.
However, a glance at past winter seeding reports suggests that this number is too high, said Jerry Gidel at broker North America Risk Management Services, counting on some two decades of experience.
"There is a tendency for producers to always come in below the average trade guess," Mr Gidel told Agrimoney.com.
"It's just part of life. You consistently see numbers 1m-2m acres under expectations."
Wheat vs cotton
And there were at least two good fundamental reasons to expect a similar tendency this time.
The first was the dry planting conditions, with just "one decent rain" spreading through parts of the key states of Oklahoma and Kansas during the ideal sowing window.
If that alone did not tempt farmers to consider alternatives, the high prices of other crops might, especially in Texas, where many growers have the alternative of cotton, which set a series of record prices in New York late last year.
Mr Gidel estimated the sowings number coming in at 40.16m acres, with his estimate for the hard red winter wheat area, at 28.9m acres, particularly low, compared with expectations of other analysts.
Price impact
Nonetheless, he was sceptical that even a sowings number at that level would be supportive to wheat prices, given the levels of the the grain already in US inventories.
Separate USDA data are expected to show American wheat stocks ending 2010-11 at 849m bushels, a figure high by past standards, if down some 13% year on year.
And at Societe Generale, Emmanuel Jayet forecast that any winter wheat sowings figure above 40m acres, and even one close to market forecasts, "may have a bearish impact" on wheat prices, at least in the short term.
"Sometimes, even when a figure is in line with market expectations, confirmation of that figure can send prices lower," Mr Jayet told Agrimoney.com.
Ploughed in?
Meanwhile, Australia & New Zealand Bank on Wednesday warned investors to brace for a high seedings figure, noting the impact of the damp-delayed corn harvest in 2009 in keeping winter wheat plantings "artificially low".
The bank also highlighted the strictures of best farming practice, saying "the market appears to be underestimating the need for US farmers to revert to a typical crop rotation pattern after pushing row crop rotations hard in 2009".
Analysts at Macquarie, whose sowings estimate of 42.8m acres was the highest given in a broker survey, said its thinking reflected an assessment that wheat prices were "attractive enough" at planting time relative to those of other crops.
Ploughed in?
However, Macquarie added that "no matter what number the USDA provides?it is far from certain how much of this area will actually be harvested", highlighting the poor start to the growing season that the parched winter wheat seedling received.
"Although conditions are improving due to recent snowfall there is still a strong chance that many farmers may opt to rip up winter wheat this spring and plant either soybeans or corn instead if relative prices?remain unfavourable.
"This could be a particularly attractive option in states such as Kansas where farmers who have traditionally planted primarily wheat have moved to being successful corn and soybean farmers over the past decade."
Other reports to be released by the USDA tomorrow include the monthly Wasde report world crop supply and demand, and quarterly grain stocks, as of December 1.
