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Plains wheat sliding; markets watching
A quick turn to drier conditions and a crop that's weeks ahead of its normal developmental pace has the Plains winter wheat crop moving downhill quickly, and the trend could have a ripple effect that hits other crops and market prices later this spring and summer.
Monday's USDA-NASS Crop Progress report showed the crop's well ahead of the usual development pace, with almost 3/4 of it heading out compared to 50% a year ago at this time. But, conditions dipped a bit, with the number of acres rated good to excellent dipping 3% and the amount in very poor or poor shape rising by 2%. Though it's just a slight dip, it could be just the beginning, too, says Bill Spiegel, communications director for Kansas Wheat.
"The crop condition has deteriorated steadily since the Wheat Quality Council Wheat Tour occurred the first of the month," says Spiegel, who also raises wheat on his farm near Jewell, Kansas. "We could see a 10% or more reduction in that 403.9 million bushel estimate, just because we haven’t received any precipitation to speak of during the crucial flowering/grain-fill period -- the time when the crop really needs it."
The growing dryness is one of a pair of converging factors that are starting to whittle away some of the earlier lofty yield projections.
"We have a confluence of two adverse conditions: dryness, and an early crop," Spiegel says. "In normal years we could handle one of the two; this year, it’s just an unfortunate combination that will likely lead to far less production than we estimated a few weeks ago in the Wheat Quality Tour, and even the NASS estimate from last week."
Soil conditions are just too dry in the Plains. Thus far, May hasn't brought the rain showers it normally does. And, along with the soils, the eagerness to double-crop soybeans with this year's accelerated wheat crop has dried up a lot over the last few weeks. But, that may not stop all farmers with prior double-cropping plans to follow through.
"With topsoil moisture being depleted, I would think there will be less likelihood for farmers to plant double crop soybeans. However, the caveat is that farmers would either have to spray or work that wheat stubble anyway, and it won’t take too many bushels to pay for the seed," Spiegel says. "So, we could still see some double-cropping...but the enthusiasm isn’t as great as it was just a few weeks ago."
The market implications of a pullback in wheat conditions and the number of potential double-cropped soybean acres in states like Kansas is starting to make their way around the CME Group grain pits in Chicago. Soybean stocks are already tight and wheat's role in the grains complex is amplified right now, says Kevin Penner, market analyst with AgTraderTalk.com in Johnston, Iowa.
"I think the trade may start to take notice. Beans are already considered extremely tight for next year so if there aren’t as many double-crop acres due to dryness that will magnify the tight stocks issue which could bolster prices," he says. "Also, old crop corn has had some pressure taken off of it because the trade assumed there would be wheat fed to livestock. If the wheat isn’t there to feed than that will put some of the demand back on corn, which could also be supportive to corn prices."