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Drought-hit US winter wheat to extend dismal start

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Investors braced for a further decline in US winter wheat condition, even after data showed seedlings extending their worst start on record, hampered by the remains of the worst drought since 1956.

The proportion of US winter wheat seedlings rated in "good" or "excellent" condition eased 1 point to 39% in the week to Sunday, the lowest figure on records going back to 1985, US Department of Agriculture data showed.

While crops in many soft red winter wheat states, which have received rain, managed improvements, these were more than outweighed by the continuing decline in the health of crops in the Plains areas growing hard red winter wheat, which have yet to recover from the summer drought.

US farmers grow roughly twice as much hard red winter wheat, the most popular type, as soft red winter wheat, the variety traded in Chicago.

'Likely decline further'

And forecasts show the likelihood of continued dryness in the Plains, of which 98.2% is still suffering some degree of drought, and the balance rated extremely dry, according to official data.

Winter wheat in best condition - % good or excellent, (change on week)

Illinois: 78%, (+3 points)

North Carolina: 77%, (+12 points)

Washington: 75%, (-2 points)

Indiana: 72%, (+3 points)

Michigan: 71%, (-2 points)

Sources: Agrimoney.com, USDA

At broker Country Futures, Darrell Holaday said: "The rainfall for hard red winter wheat country does not look good.

"Moisture continues to be pushed to the eastern edge of the hard red winter wheat production areas."

At RJ O Brien, Richard Feltes said that "the US winter wheat rating will likely decline further into mid-November", when USDA suspends its weekly crop condition ratings before resuming next spring.

Something of a trend?

While winter wheat still has a long way to go until harvest, crop ratings even this early in the growing season have some correlation to the final result, research by Societe Generale shows.

Winter wheat in worst condition - % good or excellent, (change on week)

South Dakota: 4%, (-1 points)

Nebraska: 13%, (+4 points)

Oklahoma: 21%, (-6 points)

Colorado: 27%, (-3 points)

Montana: 30%, (-1 point)

Sources: Agrimoney.com, USDA

And the US setback is only one of a number for winter wheat crops, with seedlings in some parts of Russia and Ukraine also being tested by dry soils.

In the European Union, French planting has lagged, with 64% of soft winter wheat planted as of the end of last month, compared with 88% at the end of October 2011, and 28% emerged – half the rate of a year before.

In the UK, the wet weather which cut yields to a 20-year low has stuck around to hamper seedings too, although there are as yet no official data on the extent of delays.

'Signs of stress'

In the US, the South Dakota crop is in particularly poor condition, with 4% rated in "good" or "excellent" condition as of Sunday and only 33% of seedlings emerged – down from a usual figure of 93%.

In Oklahoma, the proportion seen as good or excellent dropped by six points over the week to 21%, hurt by a mixture of volatile temperatures as well as dryness.

"The combination of warm and dry weather was taking a toll on grasses as well as the small grains planted early for winter pasture," USDA officials in the state said, adding that "it has been as many as 52 days since parts of the state have seen a quarter of an inch of rain in one day".

In Texas, where the good or excellent figure dropped 4 points to 34%, "winter wheat and oats were in need of rainfall to sustain growth," and "beginning to show signs of stress" in non-irrigated areas.

While the condition of the crop in Kansas, the top wheat producing state, held steady, "moisture is still needed throughout the state to establish the 2013 wheat crop and replenish ponds for livestock", USDA scouts said.

By Agrimoney.com

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