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Drought, cold drive US wheat price rally

30 Jan 2018 20:49 GMT
Drought, cold drive US wheat price rally

Houston, 30 January (Argus) — Winter wheat futures climbed to a four-month high today because of lower-than-normal temperatures and worsening drought conditions in the US Plains.

The March Kansas City winter wheat contract jumped 17¢/bushel to $4.70/bushel, the highest price since September, after the US Department of Agriculture (USDA) reported deteriorated crop conditions in Kansas and Oklahoma.

January ushered in freezing temperatures and little moisture to the region, further exacerbating existing drought conditions. Kansas and Oklahoma reported sub-adequate topsoil moisture levels of 79pc and 93pc, respectively. The dry conditions left the region's winter wheat crop vulnerable to freezing temperatures. Lower-than-normal temperatures resulted in below-freezing four-inch soil temperature readings in Kansas for a total of 12 non-consecutive days, according to Kansas State University.

In Kansas, where 21pc of all US winter wheat is grown, crop conditions fell by 23 percentage points month over month to 14pc rated good to excellent, the lowest rating in more than a decade. The Oklahoma wheat crop dropped by 11 percentage points from December to 4pc good-to excellent, the lowest rating since 2002.

Dry conditions in Kansas and the Southern Plains continue to worsen as 91pc of the region is now affected by some form of drought, up 14 points since the end of December. Severe and extreme drought conditions are looming in large portions of the major wheat production areas of Kansas and the Southern Plains, despite only affecting 24pc of the region.

The increase in wheat prices could lift UAN top-dress applications in the spring if winter wheat farmers try to rescue the crop. But with possible variations in production between wheat varieties lifting prices to profitable levels, northern Plains farmers could limit their fertilizer consumption by opting to plant more spring wheat instead of corn.

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