Oklahoma and Texas’ wheat production losses may remove the “cushion” from the 140 million bushel increase in hard red winter wheat stocks. Any additional decline in HRW wheat production should result in higher prices.
At this writing, Texas wheat crop conditions are rated 74 percent poor to very poor and 10 percent good to excellent. Last year, Texas’ crop was rated 48 percent poor to very poor and 18 percent good to excellent.
In 2008, Texas planted 5.8 million acres and harvested 3.5 million acres. Per acre yield averaged 30 bushels (31 bushel average) and production was 105 million bushels. Texas producers planted 6.1 million acres (+5 percent) for 2009 production.
Oklahoma’s wheat crop is rated 64 percent poor to very poor and only 9 percent good to excellent. Last year, Oklahoma’s wheat crop was rated 17 percent poor to very poor and 55 percent good to excellent.
In 2008, Oklahoma planted 5.6 million acres and harvested 4.5 million acres. Average yield was 38 bushels (31 bushels average) and production was 171 million bushels. Oklahoma wheat producers planted 5.8 million acres (+4 percent) for 2009 production.
Kansas’ wheat crop, on the other hand, is 15 percent poor to very poor and 48 percent good to excellent. Last year’s Kansas wheat crop was rated 19 percent poor to very poor and 45 percent good to excellent.
In 2009, Kansas producers planted 9.6 million acres and harvested 8.6 million acres. Average yield was 39 bushels (38 bushel average). Production was 366.6 million bushels. Kansas producers planted 9 million acres (-6 percent) for 2009.
Kansas, Oklahoma and Texas wheat production may be 175 to 200 million bushels less than 2008 production. Kansas producers planted 6 percent less acres than last year and the wheat is in about the same condition. Assuming no change in the percent harvested acres and yield, 2009 production would be 6 percent less, or 22 million bushels less than last year.
Estimates for Oklahoma’s 2009 wheat production are between 60 and 90 million bushels. Using the mid-point of 75 million bushels, 2009 production would be 96 million bushels less than last year (171 – 75).
Estimates for Texas wheat production are about 50 million bushels. This is 65 million bushels less than last year (105 – 65).
The USDA projects that HRW wheat 2009-2010 marketing year beginning stocks will be 140 million higher than last year. The expected reduction in production is expected to more than offset the 140 million bushel increase in beginning stocks.
The Kansas City Board of Trade July wheat contract price bottomed out at $5.20 on Dec. 5, 2008. On Jan. 6, 2009, the July contract price peaked at $6.92. By March 3, the price had declined to $5.52 and has been trading between $5.60 and $6.20 since March 3.
At this writing, the July contract price is $5.90. Major losses to Oklahoma and Texas’ wheat crops might have kept the July contract price from going back to the $5.20 level. This implies that wheat prices may be 60 cents higher due to the drought and freeze in Oklahoma and Texas.
The new wheat crop forward contract basis has increased from between a minus $0.75 and a minus $1.10 to between a minus $0.63 to a minus $0.95 basis the KCBT July wheat contract price. The higher basis (-$0.63) is in northern Oklahoma and the lower basis (-$0.95) is in southern Oklahoma.
The Texas Panhandle basis is between a minus $0.65 and a minus $0.75 off the KCBT July wheat contract price.
Using a minus $0.75 basis, the June 2009 wheat price is expected to be $5.15.