Given the yield variability that we face in Texas, and the planting flexibility that the existing Farm Bill gives us, we have to weigh the costs and benefits of pricing so far into the future. While we may reduce price risk, we definitely take on more production and contractual risk and may reduce our flexibility. While it is possible that the highest pricing opportunities may also be behind us for 2001 production, the added uncertainty associated with the potential of the 2001 wheat and feedgrain crops could still provide a spring rally, and another chance to get some pricing done. As we move into spring, there are several factors providing uncertainty and concern for both wheat and feedgrain market participants. The drought concerns that helped fuel the rally last spring are not there this year, but weather could still be a concern if rainfall continues to come at its current pace and starts to lead to planting delays.
Fieldwork is already behind in several parts of Texas.
May. The more current concerns that are impacting the markets are the size and condition of the U.S. winter wheat crop, and concerns over what might happen to corn acreage this spring as a result of higher fertilizer and natural gas prices. Much of the U.S. hard red winter wheat crop got off to a very slow start last fall as lack of moisture delayed plantings and emergence of some of the crop clear into winter. While crop conditions in many states look as good or slightly better than last year, do not forget that at this time last year we were suffering through a serious drought. Wheat is a resilient crop and the improved moisture conditions of the last couple months could help substantially, but market participants will likely remain concerned until they see much of the crop out of dormancy and conditions improving. The current rally could give us another chance to do some pre-harvest pricing.