Winter Wheat in the Plains Faces Freeze Damage While Futures Plummet
The winter wheat crop is trying to push its way through a major cold snap this week. From mild weather before Easter to a hard freeze, the winter wheat crop in the Plains is at risk of damage. Arlan Suderman of INTL FCStone says the risk taking off the top-end yield of this year’s crop.
“The frustration is it takes time for that to show up,” says Suderman. “Typically, a spring freeze in winter wheat happens in years when we have high yield potential. Therefore, we have damage, but we take the top off the crop and everyone says, ‘Oh, we still got a decent yield’ and think there was no damage, when there really was we would have had a bigger crop.”
@GoddessofGrain @KSUWheat Well now we wait..... pic.twitter.com/uZu6pPhwb2 — John Schlessiger (@4720john) April 13, 2020
Romulo Lollato is a Wheat and Forage Specialist with Kansas State University. He tweeted out earlier this week a temperature map, that showed frigid temperatures that blanked most of the Plains, even calling it “not a pretty picture.”
Very low minimum temperatures recorded in the last 24h, coupled with an above-ground growing point for most of south central, central, and southwest KS, is not a pretty picture. High likelihood for freeze damage to @KansasWheat in parts of KS. More info: https://t.co/LbibFOtEX4 pic.twitter.com/gtPYOCB7ZI — Romulo Lollato (@KSUWheat) April 13, 2020
Lollato says his biggest concern is in parts of Kansas; Suderman agrees.
“Overall, I’m most concerned about central Kansas, particularly that area from Hutchinson up towards Salina,” says Suderman. “That's an area where we were seeing some wheat fields where they had was for six, maybe even eight inches above the ground. So, it was more exposed more risky temperatures that were below 24 degrees for two, three and four hours depending on the location.”
Assessing freeze damage on wheat https://t.co/8RLZYcrkiL pic.twitter.com/NyED1zJYZL — OSU Small Grains (@OSU_smallgrains) April 15, 2020
Suderman says he’s also concerned about the western half of Kansas and Oklahoma, but farmers central Kansas could see the worst of it. While wheat is a hardy crop, and one that won’t die off, he thinks it could still impact overall wheat production this year.
“From what I understand, the larger, healthiest tillers sustained the most damage,” says Kevin Duling of KD Investors. “The crop isn't dead, but now has to resort to developing the smaller, later maturing tillers to carry the crop. It's hard to give a concise estimate on damage at this point, but there certainly was notable damage in a large swath of the wheat belt. I would say a minimum of 15% damage to hard red winter wheat totals at this point.”
Both Duling and Suderman know it will take time for the crop to reveal the extent of the damage.
“It really depends how quickly we warm up,” adds Suderman. “If we get back in the 70s and 80s here next week, we could know much quicker if we stay in the 40s and 50s. And it could take several weeks and delay the crop further. I think as we get further west we go the more time that tillers have to chance to regenerate some new tillers, which again, will delay the harvest leave us vulnerable if it gets hot air into June.”
Waning Wheat Prices
While wheat growers wait to see just how much damage the crop endured, the futures market seems unphased by a possible drop in production. Wheat futures dropped Tuesday, and then faced double digit price losses again on Wednesday.
“Futures are dropping, yet cash prices have been stable/rising lately; especially worldwide,” says Duling. “The Black Sea is the primary source for wheat prices and they are exceptionally dry. There are some rains in central and northern wheat areas of Russia, but the most important southern areas remain dry. Also, the dollar is showing major strength today as the world tries to print their way out of a developing recession. “
Both Duling and Suderman agree the Black Sea region is an area to watch, especially as that area waits on rain. Suderman says with the price drop this week, wheat is price friendly for buyers once again.
“That made us competitive on the world market again for hard red winter,” says Suderman. “We just missed out on the Egyptian tender, although freight from Russia was a little bit cheaper but that means we're fairly competitive right now. Overall, I think the key is going to be the dryness that's in the Black Sea right now, European model is calling for some good rains in the month of May, if those don't happen, then I think we have a more significant yield problem as we get into the Russian harvest Ukrainian harvest, and that'll start elevating world wheat prices. If those rains happen, then that kind of keeps a lid on us wheat prices.”
Even with a possible friendly story brewing in the Black Sea region, the anchor for the wheat market this year will be corn.
“Longer term, we're seeing countries that are exporting wanting to maybe pull back a little bit on what they export importing countries wanting to build the reserves a little bit for the fans are looking at wheat a good buy and spreads against other commodities,” says Suderman. “Perhaps that doesn't mean we go straight up from here corn will be kind of an anchor to wheat and limit the amount of growth.”
Duling says while countries across the world grow wheat, and it’s a crop that typically faces hefty supplies, he says the wheat balance sheet has been tightening the past five years. He says there is potential for a price-friendly story in wheat, but he cautions weather could turn friendlier, as well.
“Even with a tightening wheat balance sheet, USDA reports mask the tightness because of the supposed burdensome stocks in China,” says Duling. “For the major exporters, stocks are second tightest in history as we exit the 2019 marketing year. There is simply no room for error with the Northern Hemisphere 2020 wheat crop. Right now, we have severe dryness in Ukraine, Romania, S Russia, and the PNW of the U.S. France is now on the radar screen as a hot dry pattern has developed with low crop ratings as well as low acreage. We just had the freeze in the HRW belt of the U.S. Some reports out of China are suggesting a major cold blast damaged southern wheat areas.”