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US wheat harvest to fall by most in 26 years, boding well for prices
By Mike Verdin - Published 24/02/2017

US wheat production will fall this year at its fastest in 26 years, fuelling a decline in the world harvest, underpinning hopes of a recovery in prices, officials said.

The US Department of Agriculture, at its annual Outlook Forum giving crop prospects for the next marketing year, pegged the US wheat harvest at 1.84bn bushels, equivalent to 50.0m tonnes.

A harvest at that level would be the lowest in 11 years, and represent a 20% fall in output year on year – a pace of decline exceeded only once, in 1991-92, on data going back to the 1960s.

And wheat harvests will fall too in Australia, Canada, Russia and Ukraine, meaning that "after setting record in four consecutive years, world wheat production in 2017-18 is expected to decline", despite some recovery in output expected in the European Union, the top grower.

Dryness concerns

The US harvest forecast reflected "expectations of both lower planted area and yields", said the USDA, which on Thursday unveiled an estimate for domestic sowings for the 2017 harvest of 46.0m acres - the lowest in more than a century, and a smaller figure than investors had expected.

On yield, officials forecast a retreat of some 10% from last year's record high of 52.6 bushels per acre, flagging some dryness in the southern Plains.

Although drought in much of the northern Plains has "largely abated, sections of the hard red winter wheat belt in the central and southern Plains are experiencing dry conditions.

"In particular, areas of eastern Colorado, western Kansas, and parts of Oklahoma are experiencing areas of moderate-to-severe drought."

'Supportive for prices'

US exports will fall too in 2017-18, by 50m bushels to 975m bushels, undermined by "tough international competition", including the EU which - given the prospect of a recovery in output from last year's weather-affected levels – can expect "plentiful exports".

Nonetheless, US inventories will fall by 234m bushels to a three-year low of 905m bushels, allowing the prospect of some increase in prices.

US farmgate prices will average $4.30 a bushel next season, a rise of 11.7% from the $3.85 a bushel expected for 2016-17.

"The prospect of lower hard red winter wheat acreage… and relatively tight supplies for hard red spring wheat are supportive for US wheat prices," the USDA said.

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