Market Morsel: Is the US wheat crop at risk?
At the start of this week, cold weather hit large tracts of the US plains. There are now concerns that the winterkill will have impacted large areas.
The map below courtesy of ‘World Ag Weather’ shows the extent of the cold weather. The cold snap experienced freezing weather from the Canadian border, right down into the southern Mexico border.
The impact of the cold will be felt less in the north, as snow cover will likely be thicker, providing a blanket of insulation from the frigid temperatures. The south, however, is where the attention needs to be focused.
I have selected two states, Kansas and Oklahoma. These are both states which produce large quantities of wheat, with Kansas being the 2nd largest producer in the US, and Oklahoma being 6th.
It is not unusual to have cold weather at this time of year, as it is winter. However, it is the extent of the cold in recent days which is of concern. The two charts below show the weekly average minimum temperature. The drop in average is well below seasonal levels for this time of year.
Initial estimates of the damage are that 10-15% of the crop is at risk of winterkill. This caused a strong rally in pricing in recent days. If this does eventuate, then we’ll have another rocket under wheat pricing.
Whilst a cold snap can cause significant damage, we know that wheat is a hardy plant, and we have had cold snaps in the past which haven’t resulted in major issues. Keep a close eye, but the coming weeks will tell, more so when we start to get condition reports from the USDA.
Let’s wait and see. Misfortune in the US would assist our pricing.