The fastest-ever development of the Kansas wheat crop is drawing a record number of surveyors seeking to gauge prospects for a harvest that is poised to swell the world’s grain bins and drive prices lower.
Kansas, the top U.S. grower of winter wheat, will collect 45.8 bushels an acre when the harvest starts in May, the most since 2003 and up from 35 bushels in 2011, based on the average estimate in a Bloomberg survey of 10 analysts, some of which are among the record 100 participants expected in this year’s crop tour. As of yesterday, grain had developed in 74 percent of the crop, the most for that date since at least 1981 and up from a five-year average of 7 percent, government data show.
The price of wheat on the Kansas City Board of Trade dropped 27 percent in the past year as the U.S. Department of Agriculture forecast a 3.8 percent jump in global stockpiles to 206.3 million metric tons, the most in 10 years. Prospects for supply in the U.S., the world’s largest exporter, are improving as warm weather and timely rain in the southern Great Plains accelerate growth for crops that may be harvested as much as three weeks early.
“People are revising their estimates higher and higher” for Kansas production, said Christopher Gadd, an analyst at Macquarie Group Ltd. in London. “Kansas is expected to outperform. Any losses will come from Oklahoma and Texas. The market is pricing in a good crop already, so even if it comes out really good, it’s still in line with expectations. Everybody’s talking these yields up.”
The promise of an early glimpse at the winter-wheat crop, which accounted for 75 percent of U.S. output last year, is boosting attendance at this year’s annual tour of fields in Kansas, according to organizers at the Wheat Quality Council. Last year, there were 70 analysts, traders and growers who participated in the three-day survey of hundreds of farms.
“Knowledge is power, and people are trying to get the edge,” said Steve Shafer, the chief investment officer at Covenant Global Investors, an Oklahoma City-based hedge fund that manages $320 million. “That’s why we’re seeing the number of people rising on the tour and more requests for real-time info. People are trying to get ahead of market-pricing dynamics.”
Last year, Chicago wheat futures gained 8 percent in the three weeks after tour participants reported that drought had cut crop yields in Kansas and parts of North Dakota to 37.4 bushels an acre, compared with 40.7 bushels a year earlier. In 2010, prices plunged 8 percent in the three weeks after the tour found crops weren’t damaged as much as analysts expected by a fungal disease called stripe rust.
Wheat futures for July delivery in Kansas City, where hard- red winter wheat is traded, fell 0.8 percent to settle at $6.57 a bushel today, after touching a 20-month low of $6.3275 on April 18. On the Chicago Board of Trade, wheat futures slid 1.8 percent to $6.43 a bushel. Chicago prices may drop to $5.75 in six months, Goldman Sachs Group Inc. said on April 11.
During this year’s Kansas tour, analysts expect to make more reliable forecasts and find even bigger yields because the crop is so advanced, said Macquarie’s Gadd, who predicted Chicago futures will average $5.60 in the fourth quarter and $5.20 in next year’s first quarter.
Farmers may start collecting wheat in south-central Kansas around May 25, compared with a normal start to the harvest about June 10, said Bill Spiegel, a spokesman for Kansas Wheat, an industry group in Manhattan, Kansas. Wheat plants already are heading, or developing grain kernels, rather than flowering, making yield forecasts more accurate, Spiegel said.
“We’re nearing the finish line,” he said. “It’s easier to tell what the crop is going to look like.”
About 22 vehicles, each carrying four or five participants, will leave from Manhattan, Kansas, today, Colby tomorrow and Wichita on May 3. Each group will travel separate routes, stopping every 15 minutes to 20 minutes to inspect random fields. They will end the tour on May 3 in Kansas City to tally the final estimate of state’s average yield.
Tour estimates are based on a formula developed by the National Agriculture Statistics Service, which involves measuring the space between rows in the field, the number of plants per row, and the number of kernels on the head of the plant, if available. There are usually about a dozen such measurements per field.
“People are going to want to see how good it really is,” said Jamey Kohake, the branch manager at Paragon Investments in Silver Lake, Kansas. “They’re going to see a great crop that’s running two or three weeks ahead of schedule. The only concern is far western Kansas near the Colorado border. They’re drying out a bit. They could use some moisture.”
Last year’s tour overestimated yields at 37 bushels an acre, compared with the USDA final tally of 35 bushels, which was down 22 percent from a year earlier.
“I expect the tour to have the best estimation it’s ever had because of how far along the wheat is,” said Tom Leffler, owner of Leffler Commodities LLC in Augusta, Kansas. “This is the most advanced they’ve seen on the tour, so they’ll get a better number. Everybody’s looking at much better yields than expected. It’s going to be a very, very good crop.”
Winter wheat is planted in the Midwest and Great Plains from September to November, goes dormant until about March, and then is harvested from June to August. Spring wheat, grown primarily in northern states, is planted in April and May and harvested from August to September.
An estimated 62 percent of the Kansas winter-wheat crop was in good or excellent condition, up from 21 percent a year earlier, government data show. About 74 percent of the U.S. spring-wheat crop was sown, up from 9 percent at this time a year earlier, the USDA said.
“It’s phenomenal how good this wheat crop is compared to last year,” said Lane Broadbent, a vice president at KIS Futures in Oklahoma City. “Last year at this time, the plants were calf high. This year, they’re waist high. The optimism is high that we’re going to have a large crop.”
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