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CROPS

KANSAS AGRICULTURAL STATISTICS
Kansas Department of Agriculture
PO Box 3534
Topeka, KS 66601-3534
Phone: 785-233-2230

Released: June 12, 1998
Volume 98, No. 6

WHEAT IMPROVED FROM MAY
Text Box

INCLUDED
IN THIS
ISSUE

WHEAT
PRODUCTION

MARKET
IMPLICATIONS



The 1998 Kansas wheat crop is forecast at 393.9 million bushels as of June 1, 1998, according to Kansas Agricultural Statistics (see table 1). The current estimate is up 8 percent from the May 1 estimate but down 22 percent from the 1997 crop. The current crop will be harvested from 10.1 million acres, down 0.9 million from the 11.0 million acres harvested in 1997. Yield per harvested acre is expected to average 39.0 bushels, up 2.0 bushels from the May forecast but 7.0 bushels below the 1997 final yield.

As of June 7, wheat condition is rated 10 percent excellent, 57 percent good, 24 percent fair, 7 percent poor, and 2 percent very poor. Wheat heading is complete, and 80 percent of the acreage has begun to turn color. This is ahead of the 55 percent in 1997 and the average of 41 percent. Five percent of the acreage is ripe. The Memorial Day weekend hailstorm reduced harvested acres by 100,000 from the May 1 estimate.

Table 1-- KANSAS WHEAT PRODUCTION, JUNE 1, 1998
District Acres Planted Acres Harvested Yield Per Acre Production
1997 1998 1997 1998 % of
Prev. Yr 		199 7 1998 1997 1998 % of
Prev. Yr
WINTER WHEAT - - - - - - - - 1,000 Acres - - - - - - - - Percent Bushels 1,000 Bushels Percent
nbrthwest 1,185 1,200 1,144 1,140 100 37 39 42,861 44,500 104
West Central 1,310 1,270 1,254 1,149 92 43 39 53,445 45,000 84
Southwest 1,930 1,650 1,843 1,553 84 37 39 68,318 60,600 89
North Central 1,455 1,490 1,420 1,430 101 51 40 71,779 57,200 80
Central 1,705 1,560 1,667 1,450 87 54 40 89,883 58,000 65
South Central 2,585 2,340 2,475 2,220 90 48 38 118,240 84,300 71
Northeast 290 260 279 250 90 51 37 14,158 9,300 66
East Central 310 290 303 285 94 51 39 15,497 11,000 71
Southeast 630 640 615 623 101 52 39 31,819 24,000 75
    State 11,400 10,700 11,000 10,100 92 46 39 506,000 393,900 78

Text Box

MARKET IMPLICATIONS - Provided by Bill Tierney, Extension Ag Economist at KSU - Research and Extension Service

The USDA's second winter wheat crop estimate was larger than industry expectations. At 1,743 million bushels, the report was 8 million bushels above the average of the trade's pre-release guesstimates. Hard Red Winter (HRW) production, pegged at 1,027 million bushels, was up nearly 4 percent from the May estimate and 15 million bushels larger than the trade's forecast. On the other hand, Soft Red Winter (SRW) production, which was fixed at 454 million bushels, is down about 2 percent from the May estimate and 8 million bushels smaller than expectations. Soft White Winter (SWW) production is up by 8 million bushels, an increase of 3 percent. SWW crop conditions have been the best of all the winter wheat classes and are currently more than one standard deviation above average. In fact, SWW crop conditions are similar to the last two years during which yields averaged 69 bushels (compared to this year's estimate of 67 bushels).

Since the crop survey was conducted (the first week of June), all winter wheat crop conditions have held steady and are above average for this time of year. However, HRW and SWW crop conditions have fallen slightly. A model of HRW yields (based on the USDA's weekly crop condition reports) pegs the HRW yield at 34.6 bushels, about 2.4 bushel smaller than the HRW yield estimate derived from the today's report. SRW yields could increase or decrease based on whether the widely reported SRW disease problems (which are endemic this time of year) intensify or dissipate.

The condition of the spring wheat crop is slightly below average for this time of year. The development of the spring crop (as measured by the percent which has emerged) is well above average. As of the first week of June, 98 percent of the crop had emerged (the 13 year average for this date is 91 percent). Due to the crop's early development, a model of spring wheat yields (based on the crop's condition and stage of progress) projects that spring wheat's yield could be 33.5 bushels, about .5 bushel above the USDA's June implied projection (an "official" spring wheat crop estimate will not be released until July but the USDA's World Board did release a projection of U.S. wheat production).

Lately, there have been serious concerns about the Spring wheat crop due to a freeze across a wide part of the Spring wheat area and dry conditions in the western region. Some analysts fear that this year's weather pattern is similar to what happened in 1980 -- when spring wheat producers were forced to abandon a large portion of their acreage and yields dropped to only 25 bushels/acre. June is the spring wheat crop's most important month in terms of precipitation received. So, if this weather forecast is correct, its effect should become evident in a relatively short period of time. In 1980, the spring wheat crop's July crop estimate (the first released that year) pegged the crop to within 2 percent of the final figure.

At this time, the prospect of a large winter wheat crop should be discounted by concerns about the possibility of drought in the U.S. spring wheat area (Canadian spring wheat appears to have escaped serious damage from the frosts of last week but moisture is very short in eastern Alberta, northwestern and south central Saskatchewan). Wheat prices, however, are a function of both supply and demand. The largest component of demand for U.S. wheat (and one of the most volatile) is exports and as of the first of June, export commitments were only 127 million bushels, below last year's 155 million bushels and the lowest figure in 25 years. On average sales of this date account for 20 percent of total annual wheat grain exports.

Despite the weakness of export demand, the USDA's World Board only lowered their projection for 1998/99 wheat exports by 25 million bushels and they are still projecting wheat exports will increase by 60 million bushels over last year's figure. Barring a worsening of the drought in the U.S. northern plains, wheat prices will likely slide lower as the winter wheat harvest reaches its peak (and nearby wheat supplies increase dramatically). However, following the "harvest low", the wheat market has the potential to stage an "above average" post-harvest rally.

There are several reasons behind this projection. First, the world's ending stocks of wheat (when measured as a percent of use) are the second smallest that they've been in the nearly 40 years that the USDA has reliable world figures. Second, the dissipation of El Nino and the onset of La Nina could continue the market's nervousness regarding "unusual" weather developments this year. Finally, world wheat production is projected to decline this year and there is every likelihood that the area seeded to wheat next year will decrease (note the recent proposal in the EU to increased the set-aside from 5 percent to 10 to 15 percent).

The projection for a strong post-harvest rally is dependent on development of significant export sales in the next two months. On average, about 50 percent of total annual wheat exports are booked by September 1. If export sales don't materialize soon, wheat prices could fall below loan. If that happens, and farmers take the Loan Deficiency Payments and then sell their grain, wheat prices could fall even lower.


U.S. WINTER WHEAT PRODUCTION UP 2 PERCENT

Winter wheat production is forecast at 1.74 billion bushels, up 2 percent from May 1 but down 7 percent from last year (see table 2). Based on June 1 conditions, the U.S. yield is forecast at 42.9 bushels per acre. This is up a bushel from the May forecast but still down from last year's record high average. Grain area totals 40.6 million acres, slightly less than last month. Hard Red Winter (HRW) production is up 4 percent from last month to 1.03 billion bushels. White Winter production is up 3 percent to 263 million bushels, due to improved Pacific Northwest yields. Soft Red (SRW) is down 2 percent from last month to 454 million bushels.

The winter wheat crop developed ahead of normal as the month began. In the southern Great Plains, hot weather caused the crop to rapidly mature, but also caused conditions to steadily decline as the month progressed, especially in Texas. From the central Great Plains northward, above-normal temperatures,

combined with timely rains, kept development well ahead of normal and conditions remained mostly good. Warm weather also promoted rapid growth in the eastern Corn Belt, but crop conditions declined slightly due to diseases caused by excessive rainfall early in the month. In Montana, excessively dry weather for most of the month caused conditions to decline.

Table 2-- WINTER WHEAT, KANSAS AND SELECTED STATES, JUNE 1, 1998
State Acreage Yield Per Acre Production
Harvested
1997 		For Harvest
1998 		% of
Prev. Yr. 		1997 1998 1997 1998 % of
Prev. Yr.
1,000 Acres Percent Bushels 1,000 Bushels Percent
KANSAS 11,000 10,100 92 46.0 39.0 506,000 393,900 78
Texas 4,100 4,000 98 29.0 33.0 118,900 132,000 111
Washington 2,150 2,100 98 67.0 67.0 144,050 140,700 98
Oklahoma 5,400 5,400 100 33.0 34.0 178,200 183,600 103
Colorado 2,850 2,750 96 32.0 36.0 91,200 99,000 109
Nebraska 1,900 1,850 97 37.0 39.0 70,300 72,150 103
Montana 1,450 1,300 90 39.0 31.0 56,550 40,300 71
Missouri 1,040 1,120 108 55.0 46.0 57,200 51,520 90
Illinois 1,150 1,200 104 61.0 53.0 70,150 63,600 91
Oregon 840 790 94 67.0 66.0 56,280 52,140 93
United States 41,813 40,615 97 45.0 42.9 1,882,609 1,743,294 93


Ron Sitzman & Deonne McCray, Agricultural Statisticians
Eldon J. Thiessen, State Statistician
Eddie Wells, Deputy State Statistician

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