By Angus Brown | Source: USDA, CBOT
As outlined in last weeks analysis we are generally looking for something to go wrong in a large grain growing region to give some upside impetus for markets. April sees the first release of the United States Department of Agriculture (USDA) Crop Progress report for 2017.
The USDA provide excellent data on how crop are developing and how quickly sowing is progressing. This data is used by all levels of industry, as well as speculators to get a gauge on how supply, and therefore price might play out.
Each year in April, the USDA starts reporting crop progress, as the winter wheat crop emerges from dormancy. Additionally, the corn crop plant starts in April, with the amount of rainfall dictating how quickly corn goes in.
We are three weeks in to the 2017 crop reporting season, and for wheat things are still looking pretty rosy. While the US winter wheat plant was lower this year, the current condition is suggesting yields will be good.
Figure 1 shows how much of the winter wheat crop is rated as good or excellent at points in the growing season. Wheat crop condition has been improving over the last three weeks, climbing from 51 to 54%. While the proportion of the crop in good or excellent condition is 3 points below last year, it is seven points better than the five year average.
Those looking for an increase in wheat price will be hoping things dry out in the US, sending crop condition on a trajectory similar to the five year average, or 2014. Given the smaller plant this year, any deterioration in crop condition will have a greater impact on total production.
Figure 2 shows the other important data reported in April. A slow corn plant can impact crop development and decrease yields, and is thus good for prices. This week US farmers had 6% of the corn crop in, which is about on average. Last year the crop went in quickly, and good growing conditions resulted in a large crop.
Things are currently going ok for US wheat and corn growers, which is bad news for price rises. The slow corn plant could develop into a rally if wet weather continues to delay the sowing.
For wheat, hot dry weather would be the key to seeing crop condition decline. In 2012 crop condition started out at very high levels, but dry weather saw it decline. Figure 3 shows the impact the poorer crop condition had on prices, even though condition was still actually well above average.
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