(Dow Jones) -- Farmers in the southern U.S. Plains may take the rare step of not planting wheat come fall as a historic drought inflicts a new round of pain on the agriculture sector.
Texas and Oklahoma already this year have seen wheat, corn and cotton wither in the hot, dry weather. Cattle ranchers were forced to shrink their herds because of the parched grazing lands. Farmers in drought stricken areas now say they aren't likely to sow a new wheat crop in such poor conditions, particularly with little moisture forecast.
A drop in plantings would reduce U.S. output for a second-consecutive year of a key variety of wheat used to make bread flour. Futures prices for winter wheat grown in the southern Plains are up 13% from a year ago at around $7.65 a bushel at the Kansas City Board of Trade as concerns grow over the next crop.
"Producers may be reluctant to just plant in the dust and hope," wrote Doane Advisory Services, a St. Louis-based agricultural advisory firm, in a report this week.
The harvest in Texas, typically the country's second-largest producer of high-quality, hard red winter wheat, dropped nearly 60% this year to a five-year low of 52 million bushels. Winter wheat is planted from late August through October and then harvested the following spring. Some serves as a feed for cattle, which graze on it.
Strong prices for wheat are contributing to increased food costs. The average price for a one-pound loaf of white bread in June rose 1.2% from May to $1.49, up 8% from a year earlier, according to the U.S. Bureau of Labor Statistics. A lack of land for grazing tightens supplies of cattle, eventually pushing up beef prices.
Typically, strong wheat pricing would encourage farmers to return to the fields in autumn to plant as much as possible and hope for rain before winter. Yet, the intense nature of the drought has made farmers think twice about planting in dry soil and waiting for rain.
Planting and hoping is not a successful strategy if the soil is "bone dry from top to bottom like it is right now," with the lack of moisture keeping seeds from even sprouting, said Bob Beakley, a farmer who typically plants about 1,200 acres of wheat in northeast Texas.
"There will be no wheat planted until it rains because there is no moisture to plant on," he said.
In Texas, state data show since the drought began in October, it has been the driest 10 months since records were kept by at least an inch of rain. Forecasters see little relief in sight.
"It's just solidly hot and dry for the foreseeable future," said Mike Palmerino, meteorologist for Telvent DTN, a private weather firm.
Commodity analysts are waiting to make specific estimates for the crop until they see whether rains fall. Farmers in Texas typically plant about six million acres of wheat, irrigating roughly 20% to 25%. That leaves as much as 80% of the crop in question.
Farmers can wait until shortly before planting starts to decide whether to pick up wheat seed they have ordered from dealers. Their decisions will hinge on the weather in the weeks ahead.
A decline in plantings would be another hit to ranchers, who would lose key pasture lands. Livestock producers have already had to send cattle to slaughter earlier than usual because of a lack of hay and water, creating an increase in near-term beef supplies.
If rains don't fall in August and September, cattle producers will have to further shrink their herds because they won't be able to keep all of their animals fed without losing money. That would, in turn, eventually tighten meat supplies and push beef prices higher.
Source: Dow Jones
Posted by Haylie Shipp