April 4, 2014

Forecasts of big wheat harvest wither as drought continues

It’s been a double-whammy winter for wheat farmers in the United States, the world’s largest exporter.

It’s been a double-whammy winter for wheat farmers in the United States, the world’s largest exporter.

With drought already sapping soil moisture across the Great Plains, the biggest growing region, a polar vortex in early 2014 draped fields in a deep freeze, killing more plants than normal.

Conditions deteriorated by the most in five years, according to grain brokers Jefferies Bache and CHS Hedging.

“My main concern is the lack of subsoil moisture,” said Ron Suppes, 62, who farms about 10,000 acres near Dighton, Kan. “We have received less than a third of the normal rain since we planted. Without more than a half inch of rain in the next two weeks, the crop will decline very quickly.”

The prospect of crop damage is escalating supply concerns that sent Chicago wheat futures to their biggest rally to start a year in three decades. Prices jumped to a 10-month high March 20 after Russia’s annexation of the Crimea region in Ukraine boosted the risk of disruptions to grain shipments from the Black Sea. U.S. exports for delivery before the harvest in June are up 19 percent from last year, and domestic inventories on March 1 were down 15 percent from a year earlier.

Increased demand and uncooperative weather have combined to lift crop prices, which in turn has caused food prices to rise as well.

The U.S. retail price for all-purpose white flour reached a record 55.5 cents a pound in February, up 5.9 percent from a year earlier, data from the Bureau of Labor Statistics show.

The Department of Agriculture will issue its first estimate of this year’s U.S. crop conditions Monday. The report may show 42 percent in good or excellent condition, compared with 62 percent in November, Jefferies Bache and CHS said. A 20 percentage-point drop would the biggest during winter dormancy since 2009, data show.

“The first crop ratings of the year will show significant declines since November,” said Shawn McCambridge, the senior grain analyst for Jefferies Bach in Chicago. “It’s an anemic crop because of the moisture deficits.”

In Kansas, the biggest grower of winter wheat, Suppes said his fields in southwest Kansas have endured drought-like conditions of varying degrees for 11 straight years. On the fields his family has farmed for more than 90 years, plants that normally get about 17 inches of rain got less than 6 inches, and crops on high ground that lacked protective snow cover were damaged by the cold.

“The wheat looks green from the road, but if you were to walk out into the field and start digging down into soil, you won’t be impressed with the crop potential,” Suppes said.

As of April 1, the U.S. Drought Monitor rated 65 percent of Kansas with severe-to-extreme drought, up from 34 percent at the end of 2013. Temperatures fell to the lowest since 1982 in February, damaging plants that did not have snow cover, according to Tim Emslie, the research manager for CHS Hedging.

As of March 30, state agriculture departments reported crops rated in good or excellent condition fell to 32 percent in Kansas from 63 percent in November, while Texas saw a decline to 11 percent from 32 percent and Oklahoma dropped to 17 percent from 77 percent, USDA data show.

“Wheat is surviving off the top-soil moisture, because there is very little subsoil moisture,” Bechard said. “There’s no panic yet, but we need half an inch of rain every week for plants to recover.”

Rain and the return of more seasonably warm weather could revive the U.S. crop. Wheat is a hearty grass that can withstand periods of extreme weather, and most fields had a protective layer of snow when temperatures were at their lowest. Prices tumbled 22 percent last year, the biggest drop since 2008, on signs that record global output would boost reserves.

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