Maybe the US spring wheat belt did not dodge the drought bullet this year quite as cleanly as investors had thought.
The US Department of Agriculture estimates the 2017 US hard red spring wheat crop at 385m bushels - down 20% year on year, and a 15-year low, but above many forecasts made while the key northern US Plains growing area was grappling with summer drought
However, it seems this estimate is “viewed with some scepticism”, according to Jim Peterson, policy director at North Dakota Wheat Commission, with ideas that the USDA has overstated the crop.
‘Drawing the most scepticism’
Debate surrounds in particular USDA data on the amount of wheat that actually made it to harvest, which officials peg at some 9.7m acres, meaning abandonment of 8%, according to the latest Wheat Outlook report.
Sure, that is well up on the 2.6% seen last year.
But it is dragged lower by an especially large figure for abandonment in South Dakota, which for non-durum spring wheat as a whole is pegged at 31%, detailed (and older) USDA data show.
For North Dakota, which typically produces more than half US spring wheat, abandonment is shown at 5%, and for Montana at 8%, with Minnesota, which enjoyed far more clement conditions, seeing a figure of 2.5%.
“It is the estimates in North Dakota and Montana that are drawing the most scepticism from producers, as many areas had a significant share of acres harvested as hay,” Mr Peterson says, referring to crop cut and baled for animal feed, never making it to the more typical high-end milling uses.
How to tell if scepticism is justified?
“As the marketing year progresses, the quarterly stock estimates will help the market better define if current production estimates are too high,” Mr Peterson says.
However, ahead of the next USDA inventory report, which is not due until January, it is instructive to look at the futures markets, which are showing Minneapolis hard red spring wheat indeed staging a recovery.
OK, the flat price has not moved much, up 1.4% over the past month, December basis.
But the premium over (low protein) Chicago soft red winter wheat has, jumping 18.7% to $2.07 ½ a bushel.
That certainly speaks of some tightening in supplies.