By John DePutter & Dave Milne – May 8, 2019
“Wheat yield potential in Kansas was estimated at 47.2 bushels per acre (bpa), crop scouts on the annual Wheat Quality Council crop tour said on Thursday.”
– Reuters, May 2, 2019
What it means:
Potentially bigger supplies despite fewer acres.
If accurate, an average yield of 47.2 bu/ would be the third highest in the No. 1 winter wheat production state of Kansas since 2008.
So, despite Kansas farmers planting 6% fewer winter wheat acres for harvest this summer – part of an overall 4% decline in national winter wheat sowings – the potential for a big rebound from last year’s average Kansas yield of 38 bu/acre figures to actually increase production from the state’s 2018 winter wheat output of 277.4 million bu.
Of course, Kansas is just one of many US states that produce winter wheat, but it’s prominence cannot be overlooked. Winter wheat typically accounts for 70% to 80% of total US wheat production in any given year, and Kansas supplies up to about one-quarter of that amount. In short, Kansas – combined with the No. 1 spring wheat state of North Dakota – have plenty to say about total American wheat production.
In fairness, the winter wheat crop in Kansas and the rest of the US remains far from the bin and much could still go wrong between now and the beginning of harvest in June. And as noted by the crop scouts on the Wheat Quality Council tour, the crop in Kansas is late due to the same cooler and wetter conditions that have boosted yield potential.
Big crops elsewhere in the world
But at the same time, the strong potential in Kansas is mirrored in another key global production area, namely the Black Sea region. At this point, early yield prospects for winter wheat remain mostly favourable across Ukraine and Russia following good overwintering conditions and mid-April rainfall. (Last year’s Russia and Ukraine wheat crops of 71.6 million and 25 million tonnes, respectively, accounted for a major 13% of total 2018-19 world wheat production).
Conditions in the EU are a bit less satisfactory with some short-term dryness reported in northern areas, including Germany, although there remains ample time to improve yield prospects.
The USDA will offer its first 2019-20 global supply-demand estimates later this week, but early indications from the International Grains Council suggest the worldwide wheat trend its up. In its April 25 grain market report, the IGC pegged new-crop global wheat production at 762 million tonnes, up 3.7% from the previous year, with expected year-over-year increases in Canada, Australia, Russia and Australia.
Production rising faster than use
But perhaps the most concerning message from the IGC was that worldwide wheat production now seems to be growing faster than consumption. As a result, it is projecting 2019-20 global wheat ending stocks at 274 million tonnes, up 10 million from the previous year, and a potential new record high.
Is it any wonder the wet, cold conditions and the slow spring wheat planting progress on the US northern Plains seems to be doing little to get the market’s attention? No, it’s no surprise.
Is the big crop news accounted for by current low prices?
All this doesn’t mean wheat markets will fall a lot farther. They might fall more, or they might have already fallen enough for the time being. One of the jobs at the DePutter office is to figure out when most or all the bearish news is fully reflected by low futures prices. That’s one way we can help farmers cope with bear markets.
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