Wheat prices gain as data show US crop decline

(Agrimoney) – US winter wheat condition deteriorated markedly – particularly in the Midwest – even before the spread of cold this week to the region, official data showed, fuelling a further rebound in prices of the grain.

The US Department of Agriculture revealed that the condition of winter wheat fell in major growing states including Kansas, the country’s top wheat growing state, last month – in some cases dramatically.

In Kansas itself the proportion of wheat rated “good” or “excellent” fell by 12 points from November 23, the last reading, to 49% as of the end of last month.

“A decline of 12 points over a six-week period is concerning to us,” said Terry Reilly at Chicago broker Futures International, if adding that “as history will show, the real development of the winter wheat crop will take place after it emerges this spring”.

‘Temperatures plummeted’

In Nebraska, another major growing state for hard red winter wheat, the proportion of crop rated “good” or “excellent” also dropped by 12 points, to 57%.

In South Dakota, the rating dropped by 10 points to 58%, and in Montana by 5 points to 65%.

However, the biggest decline was in the Midwest state of Illinois, one of the top areas for growing the soft red winter wheat traded in Chicago, where the proportion of seedlings rated good or excellent slumped by 32 points to 24%.

While US officials failed to give a reason for the declines, they follows a late sowing season, after a late row crop harvest left fields tied up with standing crops longer than usual into the autumn.

“A combination of planting delays and subsequently unfavourable weather conditions was to blame for the deterioration,” Commerzbank said.

The deterioration in Illinois, where planting was particularly delayed, came before the spread this week to the Midwest of the cold temperatures which last week affected more Plains states, down to Texas.

“Temperatures plummetted 15-20 Fahrenheit below normal on the High Plains last week,” said Gail Martell, at Martell Crop Projections.

‘Bitter cold temperatures’

At Water Street Advisory, senior market analyst Arlan Suderman said that “bitter cold temperatures are expected to focus more on the Midwest, after being more of a Plains issue last week.

“Wednesday night should see the coldest temperatures.”

While snow is forecast ahead of that temperature drop, “up to a third of the Midwest soft red winter wheat belt will likely remain vulnerable to some damage”, he said.

At weather service MDA, Don Keeney said that “snow in the northern Midwest should increase winterkill protection for wheat, but damage is likely across the south central Midwest by Wednesday and especially Thursday mornings as very cold conditions return”.

The likes of eastern Nebraska, northern Missouri, south central Illinois and southern Indiana were among “favoured areas for damage”.

Prices rise

Crop deterioration fears helped wheat futures extend gains in US markets, in what broker CHS Hedging has termed “the first weather market of 2015”.

Soft red winter wheat for March gained 1.0% to $5.95 a bushel in Chicago, as of 05:15 UK time, while Kansas City-traded hard red winter wheat for March gained 1.0% to $6.31 ¼ a bushel.

Minneapolis spring wheat also gained, adding 1.1% to $6.28 ¼ a bushel, lifted by winter wheat peers, and by talk that China has purchased two cargos of US supplies and is in the market for more.