WASHINGTON, May 14, 2014 - An intensifying drought in the central and southern Great Plains will limit the U.S. to its smallest wheat crop in eight years at the same time record corn and soybean crops are on the horizon, USDA says.

The department forecasts the winter wheat crop at 1.403 billion bushels, down 9 percent from 2013 due to poorer yields, and projected the overall wheat crop at 1.963 billion bushels, down 8 percent. Drought has worsened in three leading states -- Kansas, Oklahoma and Texas -- since USDA spot-checked fields and interviewed growers for its forecast.

Agricultural economist Dan O’Brien of Kansas State University said the harvest could be even smaller than now estimated. “The drought is the main factor that would make a person wary,” he said. USDA rated 42 percent of winter wheat as poor or very poor on Monday, 4 points worse than a week earlier. In Kansas, the No. 1 state, 56 percent was poor or very poor; in Oklahoma, 75 percent.

With the smaller wheat crop, USDA forecast an average farm-gate price of $7.30 a bushel, $2 higher than it projected in February.

The higher price could draw growers toward the insurance-like Agriculture Risk Coverage option in the 2014 Farm Bill, two analysts said, but the appeal could be limited. The more traditional Price Loss Coverage option, with a reference price, is simpler and more flexible, said agricultural economist Art Barnaby of Kansas State University. Growers who enroll in PLC can use the Supplemental Coverage Option to get the same sort of protection as ARC.

Pat Westhoff, head of the think tank FAPRI, said the surge in wheat prices may be short-lived so PLC may look like a better choice for the five-year farm law. FAPRI estimates 70 percent of wheat growers will choose PLC while half of corn growers and 60 percent of soybean farmers take ARC. Soybean futures are higher than expected at the start of 2014, which may make PLC less appealing, Westhoff said.

Meanwhile, corn and soybean farmers will harvest their biggest crops ever this year, USDA said in a May 9 report, assuming normal weather and trend-line yields – 13.935 billion bushels of corn, 10 million higher than the 2013 record, and 3.625 billion bushels of soybeans, 8 percent larger than the record 3.359 billion of 2009. 

USDA projected record yields for both crops. A corn yield of 165.3 bushels an acre would offset a 4 percent drop in plantings. The soybean yield, 45.2 bushels an acre, would combine with record seedings for a crop 10 percent larger than 2013.

“They’re tipping their hat to El Nino,” said Jerry Gidel, chief feed grain analyst for consultancy Rice Dairy, referencing the weather phenomenon that usually means more rain and less heat than usual in the Midwest. But “it’s not here yet,” said Gidel, who says a lower corn yield seems likely. The government has forecast El Nino weather this summer

Record harvests of corn and soybeans, the two most widely grown U.S. crops, would replenish stockpiles as farmers in some areas recover from the 2012 drought that fueled record commodity prices. Lower feed costs would encourage livestock producers to boost pork and poultry production in 2015 while cattle producers rebuild herds, USDA said.

Soybean stocks will shrink to a two-week supply by late summer, USDA said, but expected imports of 90 million bushels – four times the usual amount – would prevent shortages.

Cotton growers are likely to abandon a quarter of their crop due to severe drought in the Southwest, including top grower Texas, USDA said, but still harvest 14.5 million bales, up 12 percent from 2013. Exports would fall by 9 percent from 2013/14. China, the top importer, is expected to reduce purchases by one-third.

While drought will slash rice production in California, growers in the Sacramento River Delta region will plant 39 percent more medium-grain rice to make up for the loss, according to USDA. The U.S. crop was projected for 213 million hundredweight, up 12 percent from 2013, part of a record world rice harvest of 480.7 million metric tons, up 10 percent.


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