Fundamentally Speaking

The USDA released its first crop condition report for the 2017 U.S. winter wheat crop on Monday and using our usual ratings system 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.

This year's initial rating comes in at 724 vs. 680 a year ago and is above the five-year average of 688, the 10-year average of 699 and the average of all years from 1987-2016 of 718.

The accompanying graphic shows the initial U.S. winter wheat crop rating given in the fall vs. the percent that the May winter wheat yield estimate -- the first of five crop production projections given by the USDA -- deviates from the 25-year trend.

To be truthful, there is virtually no relation between USDA's first winter wheat crop rating and how even the May yield deviates from trend with the correlation actually -0.09.

Last year's first crop rating was below all the averages yet good conditions over the winter resulted in the May yield estimate coming in 2.2% above trend.

However, what really matters most for winter wheat is spring weather -- especially moisture needed for the heading process. Last year's spring conditions were ideal given that the final 2016 U.S. winter wheat yield ended up at 55.3 bushels per acre, a whopping 7.5 bpa above that May projection, a new record by far that was 15.1% above the 25-year trend. This is proved by the fact that there have been many years where the first and even last fall winter wheat crop rating (end of November) has been extraordinarily high yet poor growing conditions in the winter and/or spring result in a poor winter wheat yield, while conversely a low fall rating is no guarantee that May or even final wheat yields will be below trend.

Joel Karlin, Western Milling

(KA)