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US poised for more of dryness which has helped lift futures 7% in a week

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The US Plains is poised for more of the dry weather which has left soil short of moisture, depressing winter wheat ratings in the top growing area to the lowest in at least a decade.

 

The central and southern Plains, the key region for growing hard red winter wheat, will see a “continued dry pattern… through the next 10 days,” said weather service Radiant Solutions, adding that these conditions “will maintain notable moisture shortages”.

 

And in the 11-15 day outlook too, the region is poised for “continued dry conditions” which “would maintain notable moisture shortages”.

 

The outlook comes at a time when a lack of soil moisture is already testing autumn-seeded crops severely, albeit at a time when, with crops in dormancy, water requirements are modest.

 

Kansas deterioration

 

The US Department of Agriculture in data released late on Monday pegged 14% of the winter wheat crop in Kansas in “good” or “excellent” condition – a drop of 23 points month and month, and the lowest end-of-January reading on data going back to 2008.

 

Indeed, the figure was well below the 20% end-of-January rating in 2013, as the US was emerging from its historic drought of the year before.

 

US officials rated at 79% the proportion of Kansas where topsoil is “short” or “very short” of moisture, compared with a figure of 37% a year ago, when 44% of the winter wheat crop was rated in good or excellent health.

 

‘Extremely dry weather’

 

For neighbouring Oklahoma, the second-ranked wheat growing state, the proportion of wheat rated good or excellent dropped by 11 points month on month to just 4%, again the lowest in years, and below a 5% reading for late January 2013.

 

“Oklahoma experienced extremely dry weather during the month,” USDA scouts said, noting an average of 0.52 inches of rain in the state over January.

 

On soil moisture levels, 93% of topsoil was rated short or very short - compared with 38% a year ago, when the proportion of wheat gaining a good or excellent reading was 33%.

 

In Colorado and Nebraska, winter wheat ratings fell too, as well as in Illinois, a major grower of the soft red winter wheat traded in Chicago.

 

The Illinois good or excellent figure fell 18 points month on month to 38%, albeit against a picture of more modest soil moisture shortages, but with temperatures a little below normal too.

 

‘Continued concerns for dryness’

 

Crop ratings improvement was seen in some states, including Montana, where the good or excellent reading jumped 22 points month on month to 66%, nor far below a year-ago reading of 70%, as snows helped protect crops against winter cold, and supported soil moisture levels.

 

“Winter freeze and wind damage to winter wheat remains low despite icy conditions reported in central areas of the state, with 85% of reporters observing no freeze & drought damage, and 86% reporting no wind damage,” USDA scouts said.

 

Nonetheless, the setbacks to crops in the main growing region further south has spurred a recovery in wheat futures also helped by dollar weakness, which boosts prospects for US exports.

 

“Continued concerns for dryness in the southern Plains continues to dwell in traders’ minds,” broker CHS Hedging said, also noting that “very little moisture is forecasted for hard red winter wheat country in the next 6-10 days”, bar some snow due in northern parts of Kansas around the weekend.

 

Price gains

 

Commerzbank said that “concerns” over US winter wheat condition “are now being given further fuel” by the USDA data showing that “assessments in key growing states have further deteriorated”.

 

In Chicago, soft red winter wheat futures for March delivery stood up 1.3% at $4.55 ¼ a bushel as of 11:15 UK time (05:15 Chicago time), the highest price for a spot contract in four months.

 

The contract is now up 5.2% over the past week, with weakness in the dollar also spurring gains, in making US exports more competitive.

 

Kansas City hard red winter wheat futures for March gained 2.4% to $4.64 a bushel, setting a five-month high for a spot contract, and up 7.2% over the past week.

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