ANALYSIS – Hard wheat futures build premium, as US seedlings struggle

It is amazing what difference a bit of rain seems able to make.

The winter wheat crop in North Dakota improved by 13 points in the week to Sunday, to 86% rated “good” or “excellent” in the weekly round-up by US Department of Agriculture crop scouts.

This as rains expanded the proportion of the state’s topsoil assessed as having “adequate” or “surplus” moisture expanded by 13 points week on week too, to 62%.

North and west in Montana, winter wheat made an even bigger recovery, up by 17 points week on week to 41% good or excellent. Not that growing conditions seem wonderful for the crop in the state (most of which “currently has 4-8 inches of accumulated snow”).

“Overall, 89.6% of the state continues to experience drought conditions,” USDA officials said, if reporting also that 34% of Montana topsoil held adequate or surplus moisture. Go figure.

Kansas holdback

Still, even factoring in these Herculean efforts, the national winter wheat crop rating improved by a modest 2 points week on week, to a 32% good-or-excellent figure which still represents a historically weak reading.

It is the lowest for the time of year on available data going back to 1995, and well below the trailing five-year average figure for November 13 of 51% good or excellent, on GrainPriceNews calculations.

Ratings fell week on week for states including Kansas, the top winter wheat grower, where the rating fell by 2 points to 24% good or excellent, struggling to establish in topsoil of which 66% is rated “short” or “very short” of moisture.

Crops deteriorated in some other hard red winter wheat-growing states too, including Colorado and Nebraska.

Price impact

It is a matter that investors are taking seriously.

The premium of hard red winter wheat futures to those in soft red winter wheat (as grown in Midwest states such as Illinois) has, December basis, doubled since the end of September to stand at $1.39 ¼ a bushel on Tuesday.

Concern appears to be accelerating too, with most of that premium – $0.42 ¾ a bushel worth – added this month.