Fundamentally Speaking

Kansas City wheat futures have had difficulty getting traction with values now at two-month lows.

The recent dip is linked to forecasts calling for better rain chances across parts of the central and Southern Plains and also improving conditions for wheat areas in Europe and the Black Sea.

Still the fact is that current U.S. winter wheat conditions are among the worst ever as prevent planting dates are coming up for many of the hard red winter producing states where some farmers are waiting for rains to spur seedings.

Keep in mind the correlation between fall winter wheat ratings and final yields relative to trend is rather low as how much precipitation the crop gets when it comes out of dormancy is more important than moisture conditions prior to that.

Nonetheless, Monday's first USDA winter wheat rating shows the 2025 U.S. crop well behind the eight ball.

Only 38% of the crop was rated good/excellent and that was well below the guess of 47% and below the five-year average on first ratings at 45%.

In fact, the 38% initial rating was the second worst in 37 years next to what was seen two years ago.

Along these lines, this chart shows the crop ratings for the prior year's U.S. winter wheat crop as of week 26 (around the first of July) and the following initial fall rating for new crop winter wheat on the left-hand axis.

The beginning of July rating is usually the last of the season and all years from 1986 to 2024 used that figure except for 1999, 2005, 2006, 2008 and 2012, where the last rating was in week 25.

For the ratings calculations we use our usual ratings system where we weigh 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.

Reported on the right-hand axis is the percent of the U.S. winter wheat area that is in D1-D4 drought as of the fourth week in October as indicated by the U.S. Drought Monitor data that started in 2000.

The first winter wheat rating of this year is 626, which other than the 562 reading the fourth week of October 2022, is the lowest initial winter wheat rating since national ratings were begun in the 1986/87 season.

Consider also that the rating for last year's crop at the beginning of July as harvest was really starting was a far better 682.

The 2024 U.S. winter wheat crop turned out decent with a final yield of 51.7 bushels per acre, the third highest ever at 0.9% above the 25-year trend.

Last year's initial fall rating was 660 but decent spring and early summer rains resulted in an improvement in crop ratings as the year went on.

One big reason was the eradication of drought conditions in the key winter wheat areas that had been pervasive for a number of seasons.

As of the beginning of July only 20% of the U.S. winter wheat area was in some form of drought but over the past three months the percent in D1-D4 drought has increased to 58% which other than the fourth week in October 2022 and October 2012 is the highest ever for this time of year.

Finally, the 56-point drop between the final crop rating for the 2024 crop, which was 682, and this week's 626 rating, is the second largest decline between the final rating of the prior season's winter wheat crop and the initial new crop rating since 1986 with the exception of a 60-point drop in 1999.

This highlights the exceptionally dry period much of the Plains and in fact the Corn Belt has endured really since the middle of August.

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