Northern Hemisphere Wheat Crop Has Big Yield Potential
By USWheat Associates, Market Analyst Casey Chumrau
The beginning of summer in the northern hemisphere also marks the start of wheat harvest. While there is still a long time before the entire crop is in the bin, the conditions at this point in the season provide a clearer picture of the harvest potential.
Conditions in the United States are as varied as the geography of the growing regions. Early harvest of hard red winter (HRW) wheat in the southern plains shows signs of the stress from the severe drought that plagued the area throughout the growing season. But in the northern plains, conditions are excellent and hold promise for much higher yields and output. For example, USDA rates 62 percent of the winter wheat in Kansas as poor or very poor and only 11 percent as good or excellent. By contrast, USDA rates winter wheat conditions in the northern state of Montana (still weeks away from harvest) at 62 percent good to excellent and just 9 percent poor or very poor.
Spring wheat prospects are very good thanks to the excellent conditions in the northern plains. Excessive moisture in May significantly delayed spring planting but farmers were able to make up lost time when drier conditions prevailed. USDA rates overall spring conditions as 71 percent good or excellent and only 4 percent as poor. In contrast, conditions in the Pacific Northwest have started to deteriorate in the last few weeks due to a severe lack of moisture and rising temperatures. The majority of wheat grown in the region is white wheat, both winter and spring varieties. In Washington, the percentage of winter wheat rated good or excellent fell 8 percent in just one month to 30 percent on June 22, according to USDA.
Wet conditions and unseasonably cold weather delayed spring plantings in Canada and prevented the planting of some acres altogether. In some areas, farmers rushing to finish seeding before the June 20 crop insurance deadline were unsuccessful. Agriculture and Agri-Food Canada (AAFC) expects spring-seeded area to fall 6 percent, but it could be even lower. Additionally, recent reports indicate winterkill was worse than expected in some areas so re-seeding will likely exceed AAFC’s March estimate of 8 percent. AAFC expects reduced seeded area and more average yields will lead to production of 24.6 MMT, down 21 percent from record production in 2013/14.
The wheat world now watches the Black Sea region with great interest because its production, or often lack of production, moves the market. For the second consecutive year, favorable weather provided good growing conditions that should support above average production. Low winterkill rates following a mild winter combined with timely spring rains should help boost yield potential and overcome reduced planted area. The region’s winter crops are in particularly good condition and harvest has started in the southern areas. USDA forecasts combined output from Russia, Ukraine and Kazakhstan to reach 87.5 MMT, down from 88.3 MMT last year but above the five-year average of 84.1 MMT.
Crop conditions and production prospects are generally good throughout Europe. Excellent growing conditions have put crop development ahead of normal in many areas and yields should equal or exceed average, if conditions persist. The favorable outlook led analyst Strategie Grains to increase its June estimate of 2014/15 production by 2.0 MMT to 139 MMT, which would exceed last year by 4.0 MMT. In France, the EU’s largest wheat producer, overall conditions are good. The European Commission’s Monitoring Agricultural Resources Unit expects yields to be slightly higher than average. However, dry conditions could limit yields in the eastern half of the country. Strategie Grains expects UK wheat production to rebound 30 percent to 15.5 MMT in 2014/15 following two disastrous crops in a row.
Current conditions in the Northern Hemisphere point to another abundant global wheat crop in 2014/15. Yet wheat buyers will not know the final measure of production until the last kernel is in from the fields. Nor will they know, as one U.S. market analyst pointed out this week, the volume of high-quality supplies for all classes of wheat. Global wheat demand will be lower than last year but most of the decline is in feed use, due to a rebound in corn supplies. Strong demand for high quality milling wheat remains near record levels. Despite last year’s record world crop, and projections that production will exceed 700 MMT for only the second time in 2014/15, record demand for the second consecutive year will likely keep supplies tight.