Market Analysis
With the annual Kansas wheat crop tour concluding this week and the western US Plains experiencing a highly unusual late season blizzard that damaged heading wheat stands, the market's focus has been on reports from the road and daily wrap-ups from this 3-day event. The first day covered fields across northern Kansas while the second day travels moved southward from Colby into SW Kansas and then eastward to Wichita before returning to Manhattan on the third day. This year's recent above normal rains produced a 46.1 bu average yield of the fields that were measured vs. the tour's 41.6 bu. 5-year average However, this year's heavy snows which impacted 25% of Kansas fields and snapped numerous stalks also reduced the 2nd day's field samples by one-third to just 205 this year. The Wheat Quality Council tentatively estimated the Kansas crop 282 million, down from 2016's 467 million bu. crop. Overall, the USDA's first winter wheat crop is expected to be only 1.215 billion bu. vs. 2016's 1.672 billion crop.
After four years of record world wheat output, our major world wheat export competitors also seemed poised for smaller crops in 5 out of top 6 producers with only the EU possibly recovering after France and Germany's poor crops last year. The combination of no El Nino to boost S. Hemisphere crops in Argentina and Australia and cur-rent Russian dryness could slip 2017/18's world output by 20 mmt with the US possibly contributing 13 mmt. After a 60 mmt rise in world wheat consumption in the past 4 years, a 1% (7.4 mmt) increase for 2017/18 seems like a modest increase, which could tighten the world's ending stocks by 13-16 mmt. The US 2017/18 wheat ending stocks should also decline below 900 million bu. if demand remains unchanged. These are supportive changes, but another world competitor needs to have a crop problem for a dramatic wheat price change.
What's Ahead
