Fundamentally Speaking

At last week's USDA Ag Outlook Forum (AO), department economists indicated of the three main crops, wheat area is projected to increase the most in response to continued high global prices and tight U.S and global supplies, partially due to the ongoing war in Ukraine.

Total wheat planted area for 2023/24 is projected at 49.5 million acres, up nearly 3.8 million acres from last year and the highest wheat area since 2016/17.

This is based on the results of the January winter wheat seedings report which estimated winter wheat seeded area at 37.0 million acres, up 11% from 2022/23 and the largest since 2015/16 while combined spring and durum wheat plantings for 2023/24 are projected slightly higher than last year.

This large increase in seedings would seem to set the stage for a large rebound in U.S. all wheat production and may be one of the reasons why Chicago wheat is now trading at its lowest levels since September 2021.

In fact, USDA pegs U.S. output 14% above 2022/23 at 1.887 billion bushels (bb) on both higher area and yield.

This bump in production may not be realized however if adverse weather constrains both harvested acreage and yields as has been seen in recent seasons.

The USDA has already acknowledged this fact as their Ag Outlook harvested acreage figure of 38.4 million acres is based on the 10-year average harvest-to plant ratios for all states with the exceptions of Kansas, Oklahoma, and Texas where last year's ratios are used.

This is in recognition of the long-term drought continuing to affect much of the Plains region that results in an all wheat harvested to planted acreage ratio of 77.6% which is similar to last year's 77.6% and below the 10-year average of 82.1%.

This chart shows the USDA Ag Outlook U.S. wheat yield projection and final figure in bushels per acre (bpa) on the lefthand axis vs the USDA Ag Outlook wheat harvested to planted acreage ratio projection and final figure on the righthand axis.

The figures in yellow rectangles are combined percent of High Plains area in D1 to D4 drought as of third week of February.

The USDA's projected 77.6% harvested to planted ratio for 2023 is their lowest ever estimate at their Ag Outlook Forum as for the past six years in a row their projected harvested to planted ratio has been well above the final figures.

This linked to rather poor weather in both the major winter and spring wheat producing states over the past few seasons that has capped yield potential also.

The 2022 harvested to planted ratio of 77.6% was the lowest final figure since 76.0% back in 2002.

Note that the combined percent of the area in the High Plains where a lot of the winter wheat is grown in drought category ranging from D1 which is moderate to D4 which is exceptional, along with D2 severe and D3 extreme at 62.8% down from a much higher 76% just three months ago, but still among the highest drought percentages ever as of the third week of February since 2000.

If this situation is not corrected in the coming weeks, we suspect that the USDA low initial harvested to planted ratio projection may be realized but their 49.1 bpa trend yield estimate may not be.

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