USDA did not update wheat production numbers in the September WASDE report on Sept. 12. They were looking for the survey data contained in the Small Grains report released this Friday, Sept. 29. In the Small Grains report, USDA increased all-wheat production by 1.4 million bushels from the last report, with the trade leaning toward a reduction. The biggest surprise was in the spring wheat, which was increased 14 million bushels from the August report. Hard red winter and soft red winter production were revised downward. The intra-market futures spreads continue to see Minneapolis spring wheat shedding its premium vs. the other two futures-traded classes.
Social media was abuzz back in July with reports of wheat fields in the Dakotas and Montana being zeroed out for insurance and then baled for hay. Previous NASS reports had shown little indication of that abandonment (i.e. not harvested for grain), with 96% harvested for grain. They did take that down to 92.3% Friday for the 10 states in the "other spring" production table.
There were some interesting changes in the state-by-state harvested area. NASS cut Minnesota by 140,000 acres from August, but added 170,000 acres to Montana. North Dakota was trimmed 90,000 and South Dakota dropped 270,000.
Based on this report, the wheat crop impact of the drought fell almost entirely on South Dakota and Montana. At the state level, abandonment was 5.2% for North Dakota but 30.9% for South Dakota. NASS cut the South Dakota yield 3 bushels per acre from August, but hiked North Dakota by 3 bpa. We had been hearing that North Dakota yields were better than expected, and the survey concurred. USDA hiked them from 36 to 41 bpa (still down from 46 bpa last year). The Montana average yield dropped from 22 bpa in August to 21 bpa in this report. It was 36 bpa a year ago.
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After weighting by harvested acreage and throwing in the other states, average other spring wheat yield for the U.S. was bumped up to 41.0 bpa from 40.3 in August. The yield hike more than offset the reduced harvested acres in influencing production. HRW and SRW production was trimmed vs. August, but white and durum wheat were higher than the previous estimate. Durum yields were still a train wreck at an average 25.7 bpa vs. 44 bpa last year.
|2017 US Wheat Production|
|In million bushels||USDA Actual||Average Trade Estimates||Range of Trade Estimates||August USDA|
As you can see from the table, the trade expected HRW production to be unchanged from August, but USDA reduced it by 8 million bushels. SRW was also expected to be near unchanged, but USDA revised its estimate downward by 14 million bushels. That offset the hike in spring wheat in terms of national production!
While USDA does not provide a detailed split of acreage and yield for the different spring wheat classes in this report, they did provide an HRS production number (385.005 million bushels). That was up from 364.201 million in August. Spring soft white was down 7.4 million bushels from August while spring hard white was up 1.3 million.
The bottom line? High-protein wheat is still going to be scarce, with HRS production down 128 million bushels from last year and the HRW crop not making the numbers. It may not deserve a $2 board premium to Kansas City HRW futures, particularly if Canadian production numbers continue to creep higher and imports from the north stay in the 65-75 mb range for HRS.
Slugging Friday's HRS production into the USDA by-class supply and demand table would result in 2018 ending stocks being HIGHER than last year for spring wheat. The spring wheat market's job is to ensure that exports at least make the 260 million bushels WASDE predicted in September, and discount the price as needed to get that done.
Alan Brugler may be reached at email@example.com
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