Going into Friday's round of USDA reports, the estimated spring wheat production as reported in the 2017 Small Grains Summary was one of the biggest wildcards as buyers and sellers come to terms with the effects of the summer drought conditions, which hit the Northern Plains of the United States and southern Canadian Prairies.
Those positioned on the bullish side who were looking for supportive data and a continued move into an uptrend were disappointed when the smoke cleared from the report.
Total spring wheat production was estimated at 416.2 million bushels, which is well above the average of pre-report estimates of 389 mt and higher than the August estimate at 402 mb. Today's estimate was close to the upper-end of the range of pre-report estimates.
While the market corrected sharply lower with a 21 1/4 cent drop in the December contract it did not test last week's low of $6.14 1/2/bu. As well, spreads did weaken on Friday, a sign of bearish commercial selling in the market, although the Dec/March futures spread failed to breach chart support at 13 1/4 cents on the weekly chart.
It is very likely that the debate will continue. The attached chart shows the percent of acres abandoned in 2017 across the three northern states which faced the most significant drought this season -- Montana, North Dakota and South Dakota. The blue bars represent the percent of spring wheat seeded abandoned in 2017 while the brown bars represent the five-year average for this abandonment.
In 2017, 8.4% of Montana's spring wheat acres were estimated as abandoned, as compared to the five-year average of 2.8%. In South Dakota, 30.9% of spring wheat acres are estimated as abandoned as compared to the five-year average of 3.4%. What might stand out in today's data is perhaps the estimate for abandonment in North Dakota, which is shown at 5.2% as compared to the five-year average of 1.3%.
The grey bars on the chart represent the percent change in spring wheat yield when compared to each state's five-year average. Today's data shows Montana facing the largest departure from the five-year average yield, with the 2017 average yield of 21 bu/ac being 39% below the five-year average of 34.4 bu/ac. Data for South Dakota points to an average yield of 31 bu/ac in 2017 being 33.8% below the five year average of 46.8 bu/ac. Once again, North Dakota data stands out, with this year's average yield of 41 bu/ac just 5.6 bu/ac or 12% below the five-year average.
Next week's trade will be key, with a move below the September 18 weekly low of $6.14 1/2/bu a reason for concern.
Cliff Jamieson can be reached at firstname.lastname@example.org
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