In what has been described as a “historically bad year,” many Kansas farmers are facing a tough decision: what to do with drought-stressed wheat that has little-to-no chance of making a crop.
“Abandonment will be a big deal (this year) – the real unknown,” said Kansas Wheat Commission CEO Justin Gilpin.
The state currently is in its 18th month of drought and could produce its smallest crop in half a century, Gilpin said.
Another southwestern Kansas source said his local area had not had rain since September and that many were plowing it under.
DROUGHT MONITOR OMINOUS
The National Weather Service’s weekly drought monitor is ominous for the Plains states, showing “exceptional” drought, its most extreme rating, across most of Kansas. As of last Tuesday, Wichita had only received 072 inch of precipitation from March 1 to April 30, making it “the second driest March and April on record and the driest since 1936.”
Severe to extreme drought spread north and south from Kansas and was expected to get worse for this week’s weekly drought monitor publication since no significant rainfall was predicted for the area. Only small patches of improvement were reported last week.
MANAGED MONEY COVERING SHORTS?
A week ago, managed money had a collective net short position in Hard Red Winter wheat of 6,470 contracts, according to data from the Commodity Futures Trading Commission. A week earlier, they were net long by 6,586 contracts.
However, this week’s rapid rise in Jul Kansas City Wheat futures suggests some short covering is taking place as reports of crop damage to a normally resilient crop circulate.
Futures traders also may be looking at news reports that cast doubt on the viability of an extension of the Black Sea Initiative that allows safe passage of shipping vessels in the Black Sea, a market analyst said.
Farm Futures reported Monday that a meeting is scheduled to work out an extension of the current deal that ends May 18. Russia has additional demands, but Farm Futures said Turkish officials were confident an extension could be worked out.
The USDA’s National Agricultural Statistics Service has statistics saying US farmers planted, or will plant, 49.855 million acres to all wheat for this year’s harvest, up from 45.738 million last year. No one has estimates of total harvested acres, though.
Kansas’ planted winter wheat acreage was reported by the USDA at 8.10 million acres, up 11% from 7.30 million a year ago.
ALTERNATIVES
Since drought also reduces pasture performance and hay production, hay prices have gotten extremely high, Gilpin said. If there is sufficient growth, some producers are opting to cut and bale it for cattle feed.
Some may have grazed it out, having made the decision not to harvest it two months ago, analysts said. Leaving it fallow or plowing it under also may work.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $173.03 per cwt to $173.26, compared with last week’s range of $167.24 to $183.37 per cwt. FOB dressed steers, and heifers went for $274.44 per cwt to $275.63, compared with $272.57 to $282.43.
The USDA choice cutout Monday was down $0.63 per cwt at $308.56 while select was down $3.04 at $285.12. The choice/select spread widened to $23.44 from $21.03 with 65 loads of fabricated product and 13 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.71 to $1.83 a bushel over the Jul corn contract, which settled at $5.96 1/2 a bushel, unchanged.
The CME Feeder Cattle Index for the seven days ended Friday was $200.01 per cwt, up $0.55. This compares with Monday’s May contract settlement of $203.42 per cwt, up $0.90.