April 5, 2018 / 12:54 AM / 3 months ago

What low U.S. winter wheat ratings say about final yield: Braun

CHICAGO (Reuters) - (The opinions expressed here are those of the author, a market analyst for Reuters.)

Agriculture market participants like to joke that wheat has nine lives due to its resilient nature - and in some years that seems to prove true. But this year, the U.S. winter wheat crop may be running out of lives since it has entered April in just about the worst shape ever.

For the most part, this should not bode well for final yield. But there are some factors to consider before discounting the crop’s ability to squeeze one more life out of its quota.

As of April 1, some 32 percent of U.S. winter wheat was in good or excellent condition according to the U.S. Department of Agriculture. This was the agency’s first national wheat assessment since the end of November, which featured a considerably higher rating of 50 percent.

In the last three decades, U.S. winter wheat during the first week of April carried a worse national rating than 2018 only twice: 27 percent in 1996 and 31 percent in 2002.

The poor conditions should not be too surprising given the sparse moisture in the Plains ever since planting. Between November and March, winter wheat in lead producer Kansas received the lowest precipitation total in at least 30 years. (reut.rs/2uK7iAA)

But according to history, the final national yield may still have a wide range – anywhere from a couple of points below the long-term trend to 10 percent below or even more.

PAST RESULTS

Since 1989, there have been seven instances aside from 2018 in which April began with less than 40 percent of U.S. winter wheat rated good or excellent. Final yield came in below trend in all seven of those years, but there are some key differences. (reut.rs/2JcS2PP)

In 2013 and 2011, timely precipitation in the spring pulled final yield to within 1 and 2 percentage points from the long-term trend, despite the shoddy conditions observed all season.

But in the other five years – 1989, 1996, 2002, 2006 and 2014 – national yield fell between 8 and 12 percent below trend. The worst relative yield within the last three decades was 13 percent below trend in 2015.

The lowest early April wheat rating in which final yield landed at or above the long-term trend was 44 percent in 2001. This is identical to the rating carried by the 2015 crop in the same week.

One thing the 2018 campaign has going for it is that the wheat in the Southern Plains, which grows most of the country’s hard red winter wheat, has become “less bad” over the last few weeks.

In Oklahoma, only 9 percent of the crop is in good or excellent state as of April 1, which is not much better than its season low of 4 percent back in January. But the amount rated poor or very poor has fallen sharply to 46 percent from 72 percent three weeks earlier. (reut.rs/2IsBwKf)

In Kansas, just 10 percent of winter wheat is rated good or excellent, the lowest score of the season, but the poor-to-very-poor rating has declined to 47 percent from its peak of 55 percent two weeks ago. (reut.rs/2JcnxK1)

The 2013 result should give some additional hope to farmers in hard red winter wheat country since the yield save was largely based on a considerable improvement in the Southern Plains in late spring. Some 30 percent of winter wheat was in poor or very poor state at the beginning of April 2013, the exact same amount as today.

But there is already one giant hurdle that wheat in the Plains will have to overcome this week: winter’s persistence.

As of late Tuesday, a freeze warning issued by the National Weather Service blanketed nearly the entire state of Oklahoma and southwest Missouri. It was set to expire on Wednesday morning.

Overnight temperatures into Wednesday were expected to dip as low as 20 degrees F (-7 degrees C) in parts of Oklahoma and Kansas, which if sustained for two or more hours, could seriously damage or kill wheat in the jointing phase. The same region is under the gun for similarly cold temperatures overnight on Friday into Saturday.

Editing by Matthew Lewis

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