Wheat bulls pinning hopes on the deterioration of US winter wheat may find their optimism misplaced.
The US crop is heading for the winter, and the tests from freezes it brings, in the worst shape since 2012, the tail end of the country’s last big drought year.
This time dryness is again proving the problem, testing seedlings in particular in Plains hard red winter wheat country.
But it is far too early yet to writedown yield prospects for the crop when it comes to be harvested next summer.
Kansas vs South Dakota
For a start, the 50% of the US winter wheat crop rated good or excellent by the US Department of Agriculture is hardly a disastrous rating.
The average for a final pre-winter reading (which this one was) is 54%, on both five and 10-year time horizons – and these figures include a 33% reading for late November 2012.
Sure, this year’s figures for Montana, Oklahoma and in particular South Dakota, at 18%, do not make happy reading.
But the score for Kansas, the top producing state, and which is particularly closely watched, at 51%, is in line with the five-year average.
Furthermore, crop ratings heading into winter do not have much of a bearing on results come harvest the summer anyway, however significant the threat of winter cold may appear to a poorly-established crop.
Despite its poor start, the US winter wheat crop planted in 2012 ended up at harvest the next summer giving farmers their best yield in 14 years.
By contrast, crop seeded in 2014, which marched into winter with an elevated condition score (of 62%), ended up producing the lowest yield in eight years.
More likely candidate?
Given the extent of world wheat reserves, it may take a series of setbacks to get prices on the move, particularly for lower-quality supplies, and the poor start for the US crop is not worth yet adding too much risk premium for.
Of course, what really counts for wheat investors this day is Russia, and how fares the world’s biggest exporter, and of highly competitive supplies too.
It has been a while since Russia had a real weather setback.
But it will be another six months yet before we discover whether 2018 might prove another 2012.