Drought dubbed the worst since the Dust Bowl years has increased its toll on US winter wheat, reducing the condition of crops in Kansas, the top producing state, and neighbouring Oklahoma.

The proportion of the Kansas wheat crop rated in "good" or "excellent" condition fell four points to 20% this month, data from state farm officials said.

"Limited moisture in most areas caused the condition of the winter wheat to decline," the officials said, estimating the proportion of the crop in "poor" or "very poor" health at 39%, up from 31% at the end of December.

The figures also represented a sharp deterioration from a year before, when 49% of winter wheat was rated good or excellent, and 12% poor or very poor.

Rory Deverell, at broker FCStone, said: "The Kansas wheat crop is in terrible condition."

Farm officials in Oklahoma too said that "conditions of all small grains and canola declined over the past month and were rated mostly poor or very poor", to the extent of 69%.

Just 5% of winter wheat was seen in good health, and none rated excellent."The result of the continuing drought has been poor conditions for all fall-planted crops and limited grazing of small grains," the officials said, flagging "another month of below-normal precipitation".

Most districts received 50% or less of normal rainfall last month, at a time when they had already been in drought for months.

Huge expanse

Indeed, the US drought monitor shows all of Oklahoma in drought, with 92% suffering an exceptional or extreme lack of moisture, the top two ratings.

All of Kansas is in drought too, rated exceptional or extreme in 80% of the state.

"Due to the lack of significant water, many producers are hauling water for livestock and are concerned about pasture conditions and low or dried stock pond levels," Kansas farm officials said.

'Smaller crop'

With Kansas and Oklahoma between them typically responsible for about 20% of US wheat production, the drought - which has a firm grip on the likes of Colorado and Nebraska too - has raised fears for the 2013 harvest, particularly of the hard red winter wheat prevalent in the worst-affected states.

Producers' group Kansas Wheat cautioned two weeks ago that "a smaller Kansas wheat crop could be in store" this year, noting also a 200,000-acre drop in sowings.

"Even after rain and snow events this month the state is abnormally dry," the group said.

US Wheat Associates, which aims to promote foreign demand for US wheat, said that the "stubborn grip" of drought is, after first appearing in Texas four years ago, "expanding in the US hard red winter wheat production region and now threatens some hard red spring wheat areas as well".

"Unfortunately, long-range forecasts do not anticipate much change."

Not over yet

However, at Benson Quinn Commodities, Brian Henry urged against premature pessimism, given the extent of the growing season yet to come.

"While there is no debating that the hard red winter wheat crop was in poor shape as it entered dormancy, it's too early to factor in the demise of the crop.

"This situation merits some attention as the crop approaches the growing season, but the amount of risk premium needed in the market is limited by the fact that future moisture events can help this crop."

Furthermore, exports of hard red winter wheat have been "slow, which is offering some supply cushion into the next marketing year".

At broker Country Futures, Darrell Holaday said: "With the wheat in dormancy it is hard to give a lot of credibility" to the crop ratings.

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