US winter wheat area hits lowest since 1909 - sending prices higher

13.01.2017

Wheat futures touched multi-months highs after the US revealed that its winter sowings of the grain had slumped to the lowest in 108 years, while soybean prices gained on a lower-than-expected stocks estimate.

Soft red winter wheat futures for March surged 2.7% in Chicago at one point, touching $4.30 a bushel, the highest for a spot contract since August.

In Kansas City, hard red winter wheat futures reached $4.42 a bushel, a rise of 2.4% and their highest since June.

The gains followed the release by the US Department of Agriculture of data showing that US winter wheat sowings had slumped by 3.75m acres year on year to 32.4m acres – the lowest since 1909, the year when Louis Bleriot became the first person to fly across the English Channel.

Indeed, the figure "represents the second lowest US [winter wheat] acreage on record", the USDA said.

Area has now fallen by one-half from the record levels seen in the early 1980s.

'Record low acreage'

The decline in area was particularly steep in the Great Plains, which grow in the main hard red winter wheat, the main type planted in the US, and of which sowings tumbled by 12% to 23.3m acres.

US winter wheat sowings, change on year, and from market forecast

Hard red: 23.3m acres, -3.3m acres, (-1.7m acres)

Soft red: 5.68m acres, -340,000 acres,(+20,000 acres)

White: 3.37m acres, -160,000 acres, (-100,000 acres)

Total: 32.383m acres, -3.754m acres, ( -1.756m acres)

 Sources: USDA, Reuters

"Record low acreage was seeded in Nebraska and Utah," the USDA said.

Sowings of soft red winter wheat, grown mainly in the Midwest, fell by 6% to 5.68m acres, with area decreases "estimated in most growing states", including record low plantings in Louisiana and Ohio.

White winter wheat, grown largely in the Pacific North West, saw a smaller decline, of 4% to 3.37m acres.

Sowings vs stocks

The extent of the winter wheat sowings decline was some 1.75m acres greater than the market had expected, enabling futures to rise despite some separate USDA data on Thursday which appeared less supportive for prices.

Wasde wheat data, 2016-17, change on year, and (from market forecast)

US carryout stocks 1.186bn bushels, +43m bushels, (+38m bushels)

World carryout stocks: 253.29m tonnes, +1.15m tonnes, (+1.28m tonnes)

Sources: USDA, Reuters

The USDA, in its monthly Wasde crop report, lifted its estimate for domestic wheat stocks at the close of 2016-17 by 43m bushels to 1.19bn bushels, a bigger upgrade than the market had expected, and reflecting weakened forecasts for use of the grain in livestock feed.

A third USDA report on Thursday, showing US grain stocks as of the start of last month, showed wheat inventories at 2.07bn bushels, a rise of 19% year on year, and above the level that investors had expected, implying a lower-than-forecast rate of consumption.

The particularly strong decline in sowings of hard red winter wheat, a higher protein variety, also fed through into Minneapolis-traded futures in high-quality, hard red spring wheat which, which for March touched $5.75 ѕ a bushel, the highest for a spot contract in 17 months.

Soy harvest downgrade

Soybeans also gained ground, after the USDA cut its forecast for domestic inventories of the oilseed at the close of 2016-17 by 60m bushels to 420m bushels, a bigger downgrade than expected by investors.

Wasde soy data, 2016-17, change on year, and (from market forecast)

US harvested area: 82.7m acres, -300,000 acres, (-300,000 acres)

US yield: 52.1m bushels per acre, -0.4bpa, (-0.6bpa)

US harvest: 4.307bn bushels, -54m bushels, (-67m bushels)

US carryout stocks: 420m bushels, -60m bushels, (-48m bushels)

World carryout stocks: 82.32m tonnes, -530,000 tonnes, (-260,000 tonnes)

Sources: USDA, Reuters

The revision reflected weaker estimates for both soybean sowings and yield last year, leaving production at 4.31bn bushels – 54m bushels below December's estimate, although still representing a record high.

"Soybean supplies are down 60m bushels, on lower production and imports," the USDA said.

Soybean futures for March stood 1.5% higher at $10.26 ѕ a bushel in midday deals in Chicago.

Corn demand disappointment

Meanwhile, corn futures for March lost early headway to stand 0.9% lower at $3.54 a bushel, despite the USDA also cutting its estimate for domestic production of the grain last year.

Wasde corn data, 2016-17, change on year, and (from market forecast)

US harvested area: 86.7m acres, -100,000 acres, (-50,000 acres)

US yield: 174.6m bushels per acre, -0.7bpa, (-0.5bpa)

US harvest: 15.148bn bushels, -78m bushels, (-48m bushels)

US carryout stocks: 2.355bn bushels, -48m bushels, (-30m bushels)

World carryout stocks: 220.98m tonnes, -2.27m tonnes, (-960,000 tonnes)

Sources: USDA, Reuters

The harvest was pegged at 15.15bn bushels, a downgrade of 76m bushels, again reflecting cuts to estimates for both acreage and yield, but again also still representing a record result.

However, the estimate for US inventories at the close of 2016-17 received a smaller downgrade, of 48m bushels, with some of the impact of the weaker production figure being offset by lower expectations for feed demand.

US inventories of corn at the start of last month, at 12.4bn bushels, were a little higher than investors had thought, implying weaker-than-expected consumption.


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