April 4 (Bloomberg) -- It’s been a double-whammy winter for wheat farmers in the U.S., the world’s largest exporter.
With drought already sapping soil moisture across the Great Plains, the biggest growing region, a polar vortex in early 2014 draped fields in a deep freeze, killing more plants than normal. Since crops began going dormant in November, conditions deteriorated by the most in five years, according to grain brokers Jefferies Bache LLC and CHS Hedging Inc.
"My main concern is the lack of subsoil moisture," said Ron Suppes, 62, who farms about 10,000 acres near Dighton, Kansas. "We have received less than a third of the normal rain since we planted. Without more than a half inch of rain in the next two weeks, the crop will decline very quickly."
The prospect of crop damage is escalating supply concerns that sent Chicago wheat futures to their biggest rally to start a year in three decades. Prices jumped to a 10-month high March 20 after Russia’s annexation of the Crimea region in Ukraine boosted the risk of disruptions to grain shipments from the Black Sea. U.S. exports for delivery before the harvest in June are up 19 percent from last year, and domestic inventories on March 1 were down 15 percent from a year earlier.
Extreme weather is raising costs for consumers, sending world food prices to a 10-month high in March as crop damage from dry conditions across the globe lifted everything from meat to dairy to grain, United Nations data show. The U.S. retail price for all-purpose white flour reached a record 55.5 cents a pound in February, up 5.9 percent from a year earlier, data from the Bureau of Labor Statistics show.
Wheat futures on the Chicago Board of Trade jumped 16 percent in March, the biggest monthly gain since July 2012, and are up 11 percent since Dec. 31 at $6.74 a bushel. Prices touched a 42-month low of $5.50 a bushel on Jan. 29. The Standard & Poor’s GSCI Spot Index of 24 commodities rallied 1.9 percent in 2014, led by gains in coffee, hogs, corn and nickel. The MSCI All-Country World Index of equities advanced 1.3 percent, while the Bloomberg Treasury Bond Index gained 1.4 percent.
Drier-than-normal subsoils more than doubled in March to 76 percent in an area from Texas to North Dakota, where farmers grow hard, red winter wheat, T-Storm Weather LLC in Chicago said in a note April 2. Yields may drop to 45.7 bushels an acre this year, compared with 47.4 a year earlier, Berwyn, Pennsylvania- based Planalytics Inc. said March 28. The firm based its estimate on weather and satellite images.
The U.S. Department of Agriculture will issue its first estimate of this year’s U.S. crop conditions on April 7. The report may show 42 percent in good or excellent condition, compared with 62 percent in November, Jefferies Bache and CHS said. A 20 percentage-point drop would the biggest during winter dormancy since 2009, data show.