Are You Missing Out Because Wheat Has Lost Its Hype?

by | Feb 7, 2022 | Promoted

Jim Bagshaw, Alliance Seed

Wheat used to be the Canadian prairies’ star of the party. Sure, farmers grew other crops, but the bulk of industry’s excitement and discussion centred on wheat. Then, along came canola, knocking wheat not only out of top spot, but almost entirely out of the limelight. While wheat remains one of western Canada’s top seeded crops – farmers planted nearly 22 million acres of various wheat classes in Western Canada last year – it no longer seems to capture much attention nor generate much enthusiasm. In fact, if I were an outsider judging crop importance based only on what I overheard in industry conversations, I’d likely think wheat wasn’t important at all. Unfortunately, underrating wheat could mean overlooking opportunity, especially right now.

Of all the major crops grown in western Canada, wheat is the most likely to see an upward push on commodity prices between now and the fall. Consider it:

First, whereas most crops have seen strong commodity price increases in 2021, wheat has quietly lagged behind. While wheat prices did rise in 2021, those gains have been completely overshadowed by canola more than doubling in price over the same period. As wheat is the one crop that hasn’t seen a really significant jump, I see it as the crop with the most upside potential in 2022.

Second, industry analysts largely agree wheat is just one upset in one major production area away from a significant price rally. What do I mean by that? Whereas Canada is a major international influencer of canola, pea, oat and even barley markets, we’re a relatively smaller player in the global wheat market. Wheat pricing is heavily influenced by production and movement instability in other parts of the world, and instability happens to abound right now in some of the world’s biggest wheat-producing countries. Just last night, I read commentary from a market analyst who predicted that, if tensions escalate between Russia (which holds top position for global wheat exports ) and Ukraine (which currently sits in number three export position), we could see wheat rally $2-$3/bu inside of a week.

Uncertainty is a fact of life in farming. When planning what you plant in spring 2022, guessing what the market prices will be like when you finally sell eight, 12, even 16 months down the road is nearly impossible. However, just because canola prices are strong right now does not mean they’ll still be next November. As my dad used to say, you can’t know what’s coming at you by looking in the rear-view mirror.

My advice? No matter how much hype surrounds a crop and no matter how successful it proved last year, don’t put all your eggs in one basket. Offset risk by planting a diverse range of crop types, each in multiple varieties, and without overlooking wheat. Mixing your options – planting different tolerances, different pest and disease resistances, and varying days to harvest – is the best way to hedge your bets and mitigate risk.

I think that making planting decisions is a lot like choosing RRSPs — while chasing what produced a good return last year may be tempting, choosing what has the most potential to rally this year is better economics, and spreading your risk is the best option of all.

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