From Ag Web:
Are Wheat Prices About to Wake Up?
It’s finally starting to look like the world wheat glut has peaked. Dry, hot weather from the U.S. to Europe is taking its toll on crops, and the U.S. government is forecasting global output will fall for the first time in five seasons. The adverse conditions have pushed benchmark futures in Chicago to their best start to a year in a decade, a stark reversal from the previous four years when burdensome supplies dragged down prices.
“We’re definitely at an inflection point,” Matt Connelly, grains analyst at The Hightower Report in Chicago, said in a telephone interview. “I’m thinking these world production numbers are going to creep lower and kind of wake up the world.”
It isn’t just the weather. Years of low prices encouraged farmers to plant less. While yields are up, quality has declined and the grain contains less protein. And a changing climate means more heat and dry spells everywhere. Globally, this spring was the second-warmest on record, trailing only 2016, according to the National Centers for Environmental Information in Asheville, North Carolina. The weather woes have already spooked bearish hedge funds, who cut back holdings for a third straight week. As of June 20, money managers held a net-short position, or the difference between bets on a price decline and wagers on a rise, of 20,971 futures and options, according to U.S. Commodity Futures Trading Commission data released three days later. That’s the least bearish since November 2015. On the Chicago Board of Trade, benchmark wheat futures have jumped 15 percent in 2017 to $4.7075 a bushel. Prices are trading near a one-year high.
Here’s how crops are faring in major producing regions:
Farmers are in the midst of harvesting winter wheat across the U.S. Midwest and Great Plains. Production will be lower than last year after growers planted the fewest acres in a century, and initial testing data suggests that the hard red winter crop, the largest variety grown, will have lower-than-average levels of protein for a second straight year.
That’s boosting demand for the high-protein spring variety, grown in northern states that have been plagued by drought. Conditions for the crop are the worst for this time of year since 1988.
The dryness in the north is coming after other parts of the Plains had an usually wet spring and late snow that hampered winter grain. In Canada, some areas have been too wet, while others too dry, and many spring-wheat crops are developing at a slower pace than normal.
Plants on Edward Kessel’s farm in southwestern North Dakota, near Belfield, are only about a foot tall (0.3 meter) after a dry spring. Yields may shrink to 20 bushels per acre, compared with 40 to 50 bushels in a normal year, he said.
“The crop’s not lost, but it’s in serious, serious trouble,” Kessel said. “Even if it rained right now, I think we’d still have some losses.”
A heat wave gripping western Europe is threatening production, as rising temperatures curb the potential of crops entering the critical grain-filling stage. Paris futures tracking milling-wheat touched an 18-month high last week. Output is still expected to rebound from last year’s disastrous crop, which was harmed by flooding. Still, analysts are rapidly trimming their expectations for the harvest.
“The market is still not pricing in this hot-weather risk,” said Didier Nedelec, director general of French farm adviser Offre & Demande Agricole Groupe. The group has cut its outlook for French wheat production to 35 million metric tons from 36.4 million, with further reductions possible.
Production is expected to total 24.2 million tons this season, down 31 percent from last year’s record harvest of 35.1 million, according to the latest government forecast. While eastern states have seen favorable soil moisture, below-average rains in the west triggered unfavorable planting conditions. Ongoing dryness may reduce wheat acreage, according to Commodity Weather Group.
While the USDA forecasts that record Chinese production will help stockpiles surge 16 percent to 128 million tons, the hoard will likely do little to ease global supply tightness because the nation exports very little. The country’s reserves will account for almost half of the global total, underscoring the shrinking cushion. Removing China’s inventory from the world balance sheet shows ebbing stockpiles and a clearer view of the global supply and demand picture, said Tanner Ehmke, a senior economist at CoBank in Greenwood Village, Colorado.
While most countries grapple with dryness, in Argentina farmers are suffering from too much rain. After consecutive years of heavy rains, about 100,000 hectares (247,000 acres) of waterlogged fields in the country’s main crop belt may not be planted. Still, favorable conditions in southern Buenos Aires province, known as Argentina’s bread basket, and in the north could help compensate for lost acreage. At the same time, the scrapping of an export tax means many farmers were eager to boost plantings.
One bright spot for production is in Russia, which is expected to leapfrog the U.S. to reclaim its position as the world’s No. 1 wheat exporter in the 2017-18 season. Consultant IKAR boosted its forecast for production recently, citing plentiful rains in parts of the country.
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Wet Summer Erases Drought from Kansas
From Associate Press,
What would eventually become Kansas was once described as an arid region barely hospitable enough for habitation.
"These vast plains may become in time as celebrated as the sandy deserts of Africa," the explorer Zebulon Pike wrote in 1810.
Western portions of the Sunflower State were part of what was called the Great American Desert for decades. Though settlers moving into the region in the middle of the 19th century discovered they could make a living in what seemed at first to be unforgivable conditions, the Dust Bowl that defined the "Dirty Thirties" in the following century had many wondering whether the region was destined to indeed become a desert, The Wichita Eagle reports. All of which makes what's happening now all the more remarkable: Not 1 acre of Kansas soil is considered to be in drought, according to the U.S. Drought Monitor. There have been only four periods since 2000 that Kansas has been entirely drought-free, National Weather Service meteorologist Jim Caruso said.
"It is rare to have the entire state of Kansas in drought-free status," Caruso said. A five-week stretch of May and June this year was drought-free. But that falls well short of the longest stretch since 2000: 31 weeks from September 2009 to April 2010, state climatologist Mary Knapp said in an e-mail response to questions.
"Kansas has been really fortunate this year with rainfall," Larry Ruthi, meteorologist-in-charge of the Dodge City branch of the weather service, said in an e-mail response to questions. Widespread heavy rain in April "was a real game changer for much of the central Plains," Ruthi said. A persistent weather pattern that brought moisture flowing from the Pacific into the central part of the country created an almost tropical environment in Kansas this summer.
"This has favored widespread significant rainfall," Ruthi said. Most of Kansas received more than 150 percent of its average rainfall over the past three months, he said. This summer is one of the wettest in Wichita history and one of the wettest Septembers as well. More than 28 inches of rain fell this summer in Wichita, which nearly matches the city's average for an entire year. A wet final weekend for Wichita could push 2016 to second place in the soggiest Septembers on record. That heavy rain was bad news for places such as Mulvane, which suffered through two significant floods just a few weeks apart in late summer. But the persistent rains set the stage for what agriculture officials say could be record harvests for wheat, corn and soybeans this year. Early September rains will help soybean and milo plants fill out the grain well, said Gary Cramer, an agronomist with the Kansas State University Extension Service.
"It's going to help us get the wheat in the ground and get a good start on it," Cramer said.
Even average rainfall the rest of the year should keep Kansas in good shape, he said. The subsoil is still pretty wet throughout the state, meaning it won't have to rain long for runoff to start.
"It doesn't take much rain to knock us out of the field," Cramer said. The Climate Prediction Center is projecting that the state's drought-free status will last through at least the end of the year, meaning the streak could reach double digits in terms of weeks.
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According to Storm Team 12 on KWCH for the Hays, Kansas area: Tuesday shows scattered clouds with a high of 90, low 72. Wednesday through Sunday show thunderstorms. Highs ranging from 86 to 97, lows from 66 to 70. Monday is partly cloudy with a high of 92, low 67.