Monday, April 7, 2014
CHICAGO — 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.
Since crops began going dormant in November, conditions deteriorated by the most in five years, according to grain brokers Jefferies Bache and CHS Hedging.
“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,” said Ron Suppes, 62, who farms about 10,000 acres near Dighton, Kansas.
The prospect of crop damage is escalating supply concerns and elevating prices.
Prices also 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.
Extreme weather is raising costs for consumers, sending world food prices to a 10-month high in March as crop damage from dry conditions across the globe lifted everything from meat to dairy to grain, United Nations data show.
Drier-than-normal subsoils more than doubled in March to 76 percent in an area from Texas to North Dakota, where farmers grow hard, red winter wheat, T-Storm Weather in Chicago said.
Yields may drop to 45.7 bushels an acre this year, compared with 47.4 a year earlier, Pennsylvania- based Planalytics Inc. said March 28.
The firm based its estimate on weather and satellite images.
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.
The sub-zero winter temperatures across the Plains killed some plants, which means farmers may abandon as much as 10 percent of fields, up from an average of 3 percent, said Jeff Bechard, the president of AgMark, the Beloit, Kansas-based cooperative that handles more than 50 million bushels of grain annually.
“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. Supplies are increasing from Canada, the second-largest exporter, after rail bottlenecks delayed shipment of a record crop from 2013.
Rail operators are ramping up the number of cars to move Canadian grain stuck in storage, Transport Minister Lisa Raitt said March 26 in Winnipeg. The government ordered Canadian National Railway Co. and Canadian Pacific Railway Ltd. last month to increase the number of grain cars each sends to prairie elevators to move 500,000 metric tons a week.
Money managers are still betting on a wheat rally, holding their most-bullish position since November 2012. Hedge funds and other large speculators as of March 25 were net-long 36,492 futures and options contracts, up for a third straight week, after four months of bearish bets that prices would fall.
U.S. sales of wheat for delivery by May 31 totaled 30.35 million tons as of March 27, compared with 25.53 million a year earlier, the USDA said. Sales for delivery in the 12 months that start June 1 are up 17 percent, with increased purchases by Mexico, South Korea and the Philippines, three of the top six buyers of U.S. wheat.
Rising demand helped reduce domestic wheat inventories on March 1 by 15 percent to 1.056 million bushels, the lowest for the date since 2009, USDA data show.
“You don’t want to be short wheat until more is known about the spring precipitation pattern,” said Rich Feltes, the vice president of research for R.J. O’Brien & Associates in Chicago.