Fundamentally Speaking

A serious drought has settled into the Northern Plains wreaking havoc on the fortunes of a number of crops grown in that part of the country including the Dakotas, Minnesota, Montana and Idaho.

The one crop most prominently mentioned is spring wheat, specifically hard red spring wheat which has a very high protein content and is in high demand this year due to the shortfall in the protein content of both last year's and this year's U.S. winter wheat crop.

Unfortunately yields and production are seen down sharply this year based on the poor growing conditions to date and the USDA should reflect this when the first spring wheat production report is released July 12th.

This graphic measures spring wheat crop conditions as of July 2nd since 1986 along with the percent of the crop that is heading as of July 2nd.

We plot that data against the percent that final spring wheat yields deviated from the 30 year trend.

We do not have this year's July 2nd rating, but using our usual ratings system (where we weight the crop based on the percent in each category and assign that category a factor of 2 for very poor, 4 for poor, 6 for fair, 8 for good, and 10 for excellent and then sum the results), the June 25th spring wheat rating is 618 and if we assume this will be the rating next week this would be the second worst rated crop as of that date going back to 1986 with only the 1988 crop worse with a rating of 408.

The correlation between July 2nd crop ratings and the percent that final yields deviate from the 30 year trend is 59.5% a simple regression using July 2nd crop ratings and percent headed figures points to a yield 12.7% below trend or a yield of 40.0 bushels per acre (bpa) that would be the worst since 2011's 37.7 bpa.

(KA)