By: Sakthi Prasad --
12 January, 2016
In collaboration with Govindarajan Parthasarathy, Senior Research Analyst – Crops
Late in December, southern U.S. Midwest received unseasonal heavy rains that posed a threat to the region’s soft red winter wheat.
Heavy rains caused flooding in Arkansas, Missouri and Southern Illinois — the main producing regions for soft red winter wheat, which comprises about 25% of total U.S. wheat production. Other types of winter wheat are not considered to be under threat as snowfall has insulated these crops from cold weather in the areas it is grown.
The flooding of the states mainly growing red winter wheat is not severe and in fact has had a beneficial effect on the region as it was previously reeling from drought-like conditions. The sudden floods have aided wheat production.
It is reported that 54% of the winter wheat crop is rated “good-to-excellent” in Kansas – one of the major wheat growing state, which is higher than the figure of 49% a year ago.
Other wheat growing states like Oklahoma (77%) have shown a marked improvement as well. Although crop condition has declined in some states like Colorado (54%) and Illinois (58%) due to irregular spread of snow that is preventing ample protection to the crops, it is not expected to have a significant impact on yield.
USDA forecasts total wheat production for 2015/16 to be about 55.84 MMT. Assuming that soft red winter wheat constitutes 25% of production, Beroe estimates that production figures of this crop to be at 13.96 MMT, which would be about 1.3% higher than 2014/15 figures.
CME Wheat Futures for March Delivery initially rose by 1.3% to $4.72/Bushel on December 29 owing to the floods, before dropping by 2.5% to close at $4.58/Bushel on January 4, 2016 once it emerged that the extent of damage would be less than expected.
“Some decline in U.S. wheat acreage is expected in 2016 due to low prices, but a return to a trend yield would result in a larger crop and large year ending stocks. An average near $4.75 per bushel is expected at harvest time in 2016.” Darrel Good of University of Illinois told agrimoney.com. (http://beroeinc.co/1OhFwM5)
Beroe estimates that the prices of soft winter wheat to track a marginal upward trend until the commencement of harvest in June and July, following which prices can drop due to fresh supplies entering the market.
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