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Freeze, Snow Effects Likely Cut into World’s High Quality Wheat Supply

It is still too early to project specific effects on wheat yields for marketing year 2017/18 from the late-season cold and snow event in Kansas and parts of Colorado, Texas and Nebraska. However, those close to the situation suggest the freeze and snow only add fuel to an already established trend.

“The big story with hard red winter wheat in general before the blizzard headlines was about the reduction in planted area,” said Kansas Wheat CEO Justin Gilpin. “Lower planted area, now combined with higher abandonment in this crop, encouraged USDA to project a drop in hard red winter wheat production by 344 million bushels (9.36 MMT).”

Gilpin said he expects the situation in HRW will help reduce the total U.S. wheat stocks-to-use ratio by perhaps 10 percent — but carryover stocks still support a relatively high ratio of 40 percent.

“However, it needs to be pointed out that this does not reflect the balance sheet for the high quality milling wheat that buyers here in the United States and around the world should watch closely,” said Gilpin. “The available stocks-to-use number for quality supplies is projected to be to be much tighter on a global basis.”

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Wheat Tour Finds Lower Yield Potential; Snow and Freeze Losses Still Uncertain

By Stephanie Bryant-Erdmann, USW Market Analyst

This week I joined the annual Wheat Quality Council (WQC) “Hard Red Wheat Tour” for an early survey of the new crop. Each year, participants gather in Manhattan, KS, and spend the next two and a half days in small team, randomly stopping at 14, 15 or more fields in a full day along the same routes followed for many years. The scout teams measure yield potential, determine an average for the route and estimate a cumulative average for the day when all the scouts come together in the evening.

Just a few hours before USW published this issue of “Wheat Letter,” the tour estimated a final average yield potential of 46.1 bushels per acre (bu/ac) or about 3.10 metric tons per hectare for the 2017/18 Kansas hard red winter (HRW) crop. This year the tour participants made 469 stops to scout fields. Combining seeded area with per-acre yield potential, the total production potential estimate was 282.0 million bushels (7.67 million MT). Last year’s total production estimate was 382.4 million bushels (10.4 MMT). Sampling this year was skewed toward central and eastern Kansas due to difficulties sampling in the west.

On the first day, the tour traveled from Manhattan along several routes covering most northern Kansas counties. The cumulative Day 1 average yield potential was 43.0 bu/ac, which is equivalent to about 2.89 MT per hectare, compared to 47.1 bu/ac (3.16 MT per hectare) in 2016. To reach that average, participants surveyed 222 fields recording a range from a low of 18 bu/ac to a high of 96 bu/ac. We saw moderate pressure from stripe rust, a fungal disease, as well as viral diseases wheat streak mosaic and barley yellow dwarf. Many farmers were having fungicide applied by air to protect against fungal diseases, but there is no input to check viral disease.

Participants also received a report on the Nebraska and Colorado wheat crops. Nebraska estimated an average 40.0 bu/ac (2.69 MT per hectare) for a total production estimate of 41.8 million bushels (1.14 MMT), down roughly 41 percent from last year’s tour estimate. Colorado estimated an average of 31.6 bu/ac (2.12 MT per hectare) with total production estimated at 69.5 million bushels.

On the second day, the tour traveled on routes that led from the city of Colby to Wichita, making 202 stops. The number of observations was down significantly this year due to the challenging field conditions found in the western third of the state where wet, heavy snow continued to blanket wheat fields. After digging the wheat out of the snow, scouts noted the combination of heavy snow and accompanying 50 to 60 mile per hour winds had laid substantial portions of the wheat down and in some instances had broken the wheat stems. Wheat that was knocked over by the heavy snow, then endured several days of cold temperatures.

Standing water in fields and flooded ditches made field evaluation difficult in the south central part of the state where lodging and some freeze damage was also noted. Wheat streak mosaic was prevalent on Day 2, and participants reported seeing barley yellow dwarf, leaf rust and stripe rust. This year the tour estimated Day 2 average yield at 46.9 bu/ac (3.15 MT per hectare), for a combined two-day average of 44.9 bu/ac (3.02 MT per hectare) across 427 stops. Last year, the Day 2 average was 49.3 bu/ac (3.31 MT per hectare) and the combined two-day average was 48.2 bu/ac (3.24 MT per hectare).

A word of caution to our overseas customers is prudent. The wind, snow and cold events this year are unprecedented. Participants in the tour did the best they could to evaluate the western Kansas crop, but Dr. Romulo Lollato, Assistant Professor, Wheat and Forages Production, Kansas State University told us the most accurate assessment of the storm and freeze will not be possible for 10 to 14 days after each event. “High Plains Journal” magazine is reporting from the Tour and provides more details on Day 2 activities here. Kansas Wheat published additional information here.

Participants also received a crop report from Oklahoma, where drought conditions severely impacted the southern half of the state which received one inch (2.5 cm) of rain between September and mid-February. The northern half of the state benefited from the recent rainfall. The estimated average yield in Oklahoma is 33.7 bu/ac (2.26 MT per hectare), for a total production estimate of 100 million bushels or about 2.72 MMT. If realized, that would be down 27 percent year over year. The crop development is well ahead of normal with farmers expecting to start harvest in the next three weeks.

The third and final day of the tour was shorter, with each car making 3 to 4 field stops on the way from Wichita back to Manhattan for the final report. The Day 3 estimated average yield was 58.3 bu/ac, (3.92 MT per hectare) across 49 stops.

View highlights and photos from the tour by searching #wheattour17 on Facebook and Twitter. The WQC also sponsors a spring wheat tour in the Northern Plains in July. For more information, visit the Council’s web site at https://www.wheatqualitycouncil.org.

 

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First Reports on HRW Damage from Late Season Snow and Freeze Events: “Just Terrible.”

By Steve Mercer, USW Vice President of Communications

Kansas Wheat CEO Justin Gilpin is not a fellow who is prone to hyperbole. So, when @jp_gilp “Tweets” to the world that “we lost the Western Kansas wheat crop,” people notice.

Blizzard conditions and up to 18 inches (45.8 cm) of heavy, wet snow came down hard on the rapidly maturing hard red winter (HRW) wheat crop in northwest Oklahoma, western Kansas, eastern Colorado and southwest Nebraska April 29 and 30. Much of that wheat looked very good before the storm. Its higher yield potential was a cautious hope for some farm profit this year, a hope now broken like the stems under the snow in so many fields.

This unusual event may have overshadowed separate freeze events April 22, 23 and 27 that affected a big portion of central Kansas as well as south central Nebraska and north central Oklahoma. Kansas Wheat said “the freezes may cause significant damage in many areas because the crop was in boot and early heading stages at the time.”

Local agronomists say it will take 10 to 14 days before the final effects of the unprecedented late-season freeze and snow events can be determined with any accuracy. The first estimate from the snow alone put loss potential at 50 million bushels or almost 1.4 million metric tons (MMT). That would be roughly equal to 5 percent of the 23.8 MMT 5-year average total U.S. HRW crop.

National Association of Wheat Growers (NAWG) President David Schemm, who farms near Sharon Springs in far western Kansas, captured what is probably on the minds of most Kansas farmers. In a Facebook Live video from one of his fields as he surveyed the damage, he said, “all we can say, thankfully, in these situations is that with crop insurance we can maybe keep our farm for another year.”

More tough blows to already strapped farmers are, as Justin Gilpin added in his striking Tweet, “Just terrible.” Perhaps some of the wheat — and all Central and Southern Plains wheat farmers — will recover from these stresses.

We can only hope.

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U.S. Wheat Planted Area Falls to Record Low

By Stephanie Bryant-Erdmann, USW Market Analyst

Over the past decade, U.S. wheat planted area peaked in 2008/09 at 63.2 million acres (25.6 million hectares). Since then, U.S. wheat planted area has fallen 27 percent to a projected 46.1 million acres (18.7 million hectares) in 2017/18 according to the March 31 USDA Prospective Plantings report. If realized, it will be 16 percent below the 5-year average of 55.0 million acres (22.3 million hectares) — making it the lowest planted wheat area since 1919 when USDA records began.

This report actually increased winter wheat planted area by 360,000 acres (146,000 hectares) from USDA’s January 2017 estimate to 32.7 million acres (13.23 million hectares). However, the new estimate is still 9 percent down from 2016/17 planted area. The increase came from hard red winter (HRW) area, estimated at 23.8 million acres (9.63 million hectares), up 2 percent from the previous projection. Still, HRW planted area will be down 10 percent from 26.5 million acres (10.7 million hectares) planted for 2016/17.

Soft red winter (SRW) planted area decreased from the previous estimate to 5.53 million acres (2.24 million hectares). The biggest declines occurred in Midwest states where SRW faces strong competition for acres from corn and, particularly this year, from soybeans.

USDA expects white wheat acres — planted in both winter and spring — to reach 4.12 million acres (1.67 million hectares) for 2017/18, down slightly from 2016/17, but in line with the 5-year average. For the first time in three years, the Drought Monitor shows adequate soil moisture in the Pacific Northwest (PNW) following a rather wet winter.

Given the drop in planted area, crop conditions become crucial to any look out at potential production for 2017/18. For HRW, the April 6 Drought Monitor also shows that 45 percent of Kansas and 66 percent of Oklahoma were abnormally dry or experiencing moderate drought, even though the region received 1 to 4 inches (2.5 to 10 cm) of rain last week. Fifteen percent of Oklahoma remains in severe or extreme drought. In 2016, these states grew nearly half of the total U.S. HRW crop.

Last week’s beneficial moisture improved U.S. winter wheat condition in Kansas, Oklahoma and Texas, but the crop is still in worse condition than last year at this time. As of April 3, USDA rated the winter wheat crop at 51 percent good to excellent, compared to 59 percent on the same date in 2016. USDA rated 14 percent of the crop as poor or very poor, up from 7 percent last year.

The U.S. Northern Plains received abundant precipitation this winter, providing good soil moisture for HRS and durum planting. The past two years, farmers in North Dakota, Montana and Minnesota began HRS planting 7 to 14 days ahead of normal due to early springs. This year, planting dates will be closer to normal as farmers are now waiting for fields to dry out.

According to USDA, U.S. total spring-planted area will decline to an estimated 11.3 million acres (4.57 million hectares), 3 percent less than in 2016/17. The estimate includes 10.6 million acres (4.3 million hectares) of hard red spring (HRS), down 7 percent from 2016, if realized.

USDA expects U.S. durum planted area to total 2.00 million acres (809,000 hectares), down 17 percent from 2016/17. If realized, this would further constrict the global durum supply discussed in the March 23 Wheat Letter.

Continuing to drive the decline in U.S. wheat planted area is a net farmer return on wheat that dropped 18 percent between 2015/16 and 2016/17, while input costs declined only one percent in the same time period. USDA expects this trend to continue in 2017/18, with returns falling another 6 percent from already unprofitable 2016/17 levels.

There is a long way to go before the final count is in. However, with less planted area and an expected return to trend line yields, the International Grains Council (IGC) pegged 2017/18 U.S. wheat production at 50.2 MMT, down 20 percent from 2016/17.

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USDA Expects U.S. Wheat Production to Fall 20 Percent Year-Over-Year

By Stephanie Bryant-Erdmann, USW Market Analyst

The USDA held its annual Agricultural Outlook Forum Feb. 23 to 24 where the 2017 Grain and Oilseeds outlook was presented. USDA currently estimates 2016/17 (June to May) wheat acreage at 46.0 million acres (18.6 million hectares), a nine percent decrease from last year.

USDA reported that winter wheat plantings are down 10 percent with the HRW crop having the largest decrease. HRW plantings fell by 12 percent to 23.3 million acres (9.43 million hectares). Soft red winter (SRW) plantings decreased by 300,000 acres (121,000 hectares) to 5.7 million acres (2.3 million hectares). USDA anticipates a 3 percent reduction in spring wheat plantings due to more favorable returns for other commodities. Currently, USDA’s spring wheat and durum acreage projection stands at 13.6 million acres (5.51 million hectares).

Due to the expected reductions in planted area and a return to trend line yields, production will decrease to a projected 50.0 MMT. If realized, that would be down 20 percent year-over-year. Based on trend yields, USDA expects the national average yield to fall to 47.1 bushels per acre (31.6 MT per hectare). USDA projects the wheat harvested-to-planted ratio will be 0.85, on par with 2016/17 and the 5-year average.

Though winter wheat planted area is at its lowest level in 108 years, growing conditions can greatly impact production levels as demonstrated in 2016/17. In February, winter wheat ratings declined in Illinois, Kansas, Montana, Nebraska, North Dakota and South Dakota, according to the monthly USDA Crop Progress report. The biggest change was noted in Montana, where USDA rated 5 percent of winter wheat in good to excellent condition compared to 70 percent in January. The percentage of Oklahoma wheat rated good to excellent increased to 43 percent, up from 33 percent in January. USDA reported 15 percent of Oklahoma wheat in poor or very poor condition, down from 17 percent in January, but significantly higher than the 1 percent poor or very poor on the same date last year. USDA resumes weekly crop progress reporting on April 3.

Large carryover stocks will partially offset the projected lower production, yet the forecast expects total U.S. supplies to decrease in 2017/18. USDA forecasts 2017/18 U.S. supplies at 84.3 MMT, down 9 percent from 2016/17, still 1 percent more than the 5-year average, if realized. Demand in the United States will decline in 2017/18, due to decreased feed usage. USDA anticipates a 2 percent decrease in domestic use, from 33.9 MMT to 33.1 MMT.

Smaller U.S. supplies and competition from other origins are expected to constrain U.S. wheat exports. USDA expects U.S. exports to decline slightly to 26.5 MMT, down 5 percent from the forecasted 2016/17 U.S. wheat export level of 27.9 MMT. U.S. ending stocks are forecast to decrease to 24.6 MMT, down 21 percent year-over-year but still 8 percent above the 5-year average.

To read more from the USDA Outlook Forum or to download presentations, please visit https://www.usda.gov/oce/forum/.

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Harvest Report
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Central and Southern Plains HRW is Generally Dry and Vulnerable to Frost Damage

By Stephanie Bryant-Erdmann, USW Market Analyst

USDA reported state planted area statistics for hard red winter (HRW), soft red winter (SRW) and soft white (SW) winter wheat in its Jan. 12 Winter Wheat and Canola Seeding Report. At this week’s Wheat Quality Council and Plains Grains Inc. board meetings in Kansas City, MO, however, HRW producers shared state updates of crop conditions, soil moisture conditions and planted area. A summary of what we learned from the producers supplemented with current USDA data by state follows.

Colorado. Colorado farmers planted 891,000 hectares (2.20 million acres) of wheat in the fall of 2016, down 6 percent from 2015. Farmers reported that southeast Colorado planting conditions were very dry, but the rest of the state had ample moisture. According to USDA data, topsoil moisture is short or very short for 35 percent of the state, compared to just 22 percent short or very short at the same time last year. Subsoil moisture is 42 percent short or very short across the state compared to 23 percent last year. Farmers noted warm weather has pushed the crop 7 to 10 days ahead of normal across the state, which makes it more vulnerable to late frost damage. On Jan. 30, USDA rated 36 percent of Colorado winter wheat in good to excellent condition compared to 47 percent good to excellent when the wheat went into dormancy last fall.Kansas. Farmers reported western Kansas is very dry. Subsoil moisture is rated at 41 percent short or very short, compared to 22 percent last year. USDA rated 37 percent of topsoil moisture as short or very short, compared to 19 percent in 2016. Early planted wheat established good stands last fall, but later planted wheat condition is more uncertain. On Jan. 30, USDA rated 45 percent of winter wheat as good to excellent compared to 52 percent good to excellent reported on Nov. 28. Last fall, Kansas planted 3.00 million hectares (7.40 million acres), down 13 percent year over year and the lowest planted area in 60 years.

Montana. Last fall, wet field conditions prevented some wheat planting in Montana. With a poor outlook for winter wheat prices, strong competition from peas and lentils shifted more acres in Montana. They planted 770,000 hectares (1.90 million acres) of wheat in 2016, down 16 percent from 2015. Farmers noted normal crop development and sufficient soil moisture, though some areas had below normal snow cover that increased the risk of winterkill. USDA rated topsoil moisture supplies at 13 percent short or very short, 77 percent adequate and 10 percent surplus, compared to 17 percent short or very short, 79 percent adequate and 4 percent surplus last year on the same date. On Jan. 30, USDA rated 70 percent of Montana winter wheat in good to excellent condition compared to 77 percent good to excellent when the wheat went into dormancy last fall.

Nebraska. Farmers reported good stands last fall, but western Nebraska is dry. The last measurable precipitation for that region occurred on Christmas day. USDA rated subsoil moisture supplies at 31 percent short or very short, compared to 19 percent on the same date last year. Topsoil moisture supplies are 23 percent short or very short, compared to 14 percent last year. With wheat now 5 to 7 days ahead of normal, the Nebraska crop is also more vulnerable to late frost damage. USDA rated 47 percent of Nebraska winter wheat in good to excellent condition on Jan. 30, compared to 53 percent good to excellent last November prior to dormancy. Nebraska farmers planted 441,000 hectares (1.09 million acres) of wheat in 2016, down 20 percent from 2015 and the lowest planted area on record for Nebraska.

Oklahoma. Most of Oklahoma received precipitation over the last few weeks that prevented further depletion of soil moisture, but it was insufficient to alleviate drought conditions. USDA rated topsoil moisture supplies at 38 percent short or very short compared to 60 percent short or very short last year. Subsoil moisture supplies are 56 percent short or very short, compared to 70 percent one year prior. Farmers noted wheat development is 12 days ahead of normal making it more vulnerable to late frost damage. Oklahoma farmers planted 1.82 million hectares (4.50 million acres) of wheat in 2016, down 10 percent from the prior year because late-season rain prevented some wheat planting. USDA rated 33 percent of Oklahoma winter wheat in good to excellent condition on Jan. 30, compared to 53 percent good to excellent when the wheat went into dormancy last fall.

South Dakota. Beneficial moisture last fall allowed for good stand establishment in South Dakota. Abundant snow cover is protecting the wheat and limiting winterkill risk. Topsoil moisture supplies rated 84 percent adequate, compared to 79 percent adequate last year. Subsoil moisture supplies rated 23 percent short to very short, 76 percent adequate and 1 percent surplus compared to 26 percent short or very short, 72 percent adequate and 2 percent surplus in 2016. USDA rated 62 percent of South Dakota winter wheat in good to excellent condition compared to 51 percent good to excellent when the wheat went into dormancy last fall. South Dakota farmers planted 364,000 hectares (900,000 acres) of winter wheat, down 24 percent year over year.

Texas. Last fall, Texas farmers planted 1.82 million hectares (4.50 million acres) of wheat, down 10 percent from the prior year in very dry field conditions. In the past two years, Texas planted wheat area has dropped by 20 percent. Early planted wheat emerged last fall, but the later planted wheat did not emerge until after beneficial precipitation fell in December. Farmers estimate the earlier planted wheat is 7 days ahead of normal development, while the later planted wheat is still emerging. USDA reported 93 percent of winter wheat had emerged by Jan. 30. On Jan. 30, USDA rated 29 percent of Texas winter wheat in good to excellent condition compared to 41 percent good to excellent when the wheat went into dormancy last fall.

USDA will release its next crop progress update Feb. 28 and will resume weekly crop condition reporting April 3.

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International Grains Council Sees a Smaller 2017/18 Wheat Harvest

By Stephanie Bryant-Erdmann, USW Market Analyst

USDA will issue its first 2017/18 world wheat supply and demand estimates in May, but on Jan. 19 the International Grains Council (IGC) provided an early look ahead at the next marketing year. IGC pegged 2017/18 world wheat production at 735 million metric tons (MMT), down 2 percent from the estimated 752 MMT produced in 2016/17. If realized, it would still be the third largest wheat crop ever, but would be the first year over year decline in 5 years. For comparison, USDA estimates 2016/17 global wheat production at 753 MMT.

IGC expects just two of the major exporting countries, Russia and Ukraine, to harvest more wheat in 2017/18, even though their estimates are up only 1 percent and 2 percent, respectively. IGC predicts European Union harvested area will remain stable in 2017/18. Harvested area is forecasted to fall 3 percent in Argentina, Australia and Canada, while IGC expects farmers in the United States and Kazakhstan to harvest 8 percent and 10 percent less wheat, respectively.

Harvested area in Morocco is expected to rebound to a more normal level after widespread rain eased drought conditions that cut its 2016/17 harvested area by 26 percent in 2016/17 to just 5.19 million acres (2.1 million hectares). Projected increases in India, North Africa, Turkey, Iran and Egypt will offset the expected decreases in harvested area among the major exporters according to IGC data.

2017/18 carry-in stocks are estimated at a record large 235 MMT, up 6 percent year over year, if realized. However, the larger carry-in stocks are not anticipated to offset the forecasted decrease in production, and total world supply would decline 3 MMT to a projected 970 MMT.

For the first time since 2012/13, IGC expects total consumption to be greater than total production. Total consumption is forecast at 737 MMT, down an estimated 1 MMT from 2016/17. Food use will climb over 500 MMT for the first time ever, partially offsetting an expected decrease in feed and residual use due to smaller production in Canada and the United States.

IGC believes 2016/17 world wheat trade will shrink to 164 MMT, down 4 percent from the prior year, if realized. With consumption outpacing production, IGC expects carryout stocks to decrease marginally year over year to 234 MMT.

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Outlook for 2017/18 U.S. Winter Wheat Plantings

By Stephanie Bryant-Erdmann, USW Market Analyst

U.S. farmers made critical decisions last fall while they had bins full of wheat from record-breaking yields with prices near ten-year lows. Therefore, it is no surprise that many farmers chose to decrease their winter wheat planted area. USDA’s 2017/18 winter wheat seeding report released Jan. 12 reported U.S. farmers planted the second lowest number of winter whea­­t acres on record and 10 percent fewer acres than 2016/17. USDA estimated U.S. farmers planted 32.4 million acres (13.1 million hectares) of winter wheat with reductions for all three classes of winter wheat — HRW, soft red winter (SRW) and white winter wheat.

USDA assessed HRW planted area at 23.3 million acres (9.43 million hectares), down 12 percent from 2016. Planted area in Kansas, the number one U.S. HRW-producing state at 7.40 million acres (3.00 million hectares), is down 13 percent from 2016 and 20 percent below the 5-year average. Nebraska farmers planted a new record low area to winter ­­wheat of just 1.09 million acres (441,000 hectares), 25 percent below the 5-year average.

Total SRW planted area of 5.68 million acres (2.30 million hectares) fell 6 percent from 2016. Increases in Delaware, Georgia, Kentucky, Maryland, North Carolina and South Carolina were not enough to offset decreases in most of the other SRW-producing states, including a 16 percent decline in Ohio, the number one producer of U.S. SRW in 2016/17. USDA believes Ohio farmers planted 490,000 acres (198,000 hectares) of SRW, 15 percent below the 5-year average.

White winter wheat planted area decreased to 3.37 million acres (1.36 million hectares), down 4 percent from 2016/17. Exportable soft white wheat supplies are concentrated in Idaho, Oregon and Washington. Planted area in Idaho and Oregon fell 4 percent and 3 percent, respectively. Idaho farmers planted 730,000 acres (295,000 hectares) compared to 760,000 acres (308,000 hectares) in 2015/16 and 2016/17. Planted area in Oregon dropped 20,000 acres (8,000 hectares) from 2016/17 to 700,000 acres (283,000 hectares), while planted area in Washington remained stable year over year at 1.70 million acres (688,000 hectares).

Durum planting in the Southwestern United States is estimated at 140,000 acres (56,700 hectares), down 8 percent from 2016/17 and 38 percent below 2015/16. According to USDA, planting is well underway in Arizona at 22 percent complete, up 8 percentage points from the same date last year. Delays from wet conditions are slowing progress in California. Arizona and California plant durum from December through January for harvest in May through July.

With the decrease in planted area in the United States, customers should pay close attention to weather maps and consider purchasing farther out to protect themselves from supply shocks.

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