Talk of disease and storm damage stoked doubts over the ability
of US winter wheat to hold on to a, relatively, elevated condition rating, even
as investors downplayed a slightly disappointing reading for corn.
The US Department of Agriculture surprised markets by keeping
at 45% as of Sunday the proportion of domestic winter wheat rated as "good" or "excellent",
despite the heavy rains which destroyed homes, and caused some deaths, in the
southern Plains over the weekend.
"The market had anticipated a much poorer picture in the
wake of the heavy rainfall and flooding in the US," Commerzbank said, noting
that the condition reading was "15 percentage points higher than at the same
time last year".
At Chicago broker Futures International, Terry Reilly said: "We
were shocked to see US winter wheat condition unchanged," given the weather
setbacks in the southern Plains, hard red winter wheat country.
'Concern for disease'
The USDA reading reflected improved ratings for states including
Kansas, the top US wheat growing state, where the proportion of crop rated good
or excellent was upgraded by 1 point to 30%.
This helped offset declines to figures in both Oklahoma and Texas,
where floods struck, while ratings in Midwest soft red winter wheat states such
as Illinois, Indiana and Ohio improved too.
However, USDA scouts flagged concerns nonetheless over wheat
crops which may come to dog futures readings.
In Kansas, scouts noted some reports "that wheat was
stressed due to rust", a fungal disease which can cause significant yield
In Ohio, the top soft red winter wheat-growing state, "increased
humidity is bringing concern for disease development in wheat", scouts said.
Meanwhile, in neighbouring Kentucky, "recent winds and rain
has caused wheat to lodge in certain areas", and west in Nebraska, "wet
conditions have been favourable for disease development in south eastern wheat
This excludes the damage in Oklahoma, where "hail and wind
damage continued to affect small grains", and Texas, where USDA scouts noted "lodging
of wheat and oats due to flooding and high winds".
Quality and quantity
Futures International's Terry Reilly said, with further rain
on its way, "wet weather disease and quality issues in the US southern Plains
will continue this week", flagging the potential for setbacks in soft red
winter wheat country too.
"Midwest wheat conditions may deteriorate this week with too
much moisture and warm conditions possibly promoting quality declines," he
Besides the threat to quality, the heavy weather looks like prompting
a cut to production hopes too, from crop losses.
"Regardless of where wheat ratings end up at the end of the
month, we look for USDA to lower its hard red winter wheat harvested area [estimate]
by 500,000-700,000 acres and soft red winter wheat harvested area 100,000 acres"
in its next Wasde crop report.
'Big corn crop'
However, Mr Reilly forecast the potential for the US corn
harvest to exceed by some 200m bushels the USDA's current estimate of a
13.63bn-bushel harvest this year, after the report overnight pegged at 74% the
proportion of the US crop rated as good or excellent.
Although the rating was 1 point below market forecasts, it
still represents a "historically high" figure, he said.
At Benson Quinn Commodities, Nicholas Sax said that "the
consensus remains favourable for a big corn crop moving forward.
"A number of analysts are indicating there is potential to
add acres and yield to the crop, pending confirmation of forecasted weather."
At broker Allendale, Paul Geory said that "frost and too
much rain" were behind the slightly shortfall in the US corn rating, the first
of the season, behind market expectations.
The first USDA corn condition reading for the previous five
seasons averaged 69%, while the highest in recent history was 78%, in 2007,
which ended up showing a good, but not record, yield of 150.7 bushels per acre.