About 70 percent of the U.S. harvest comes from winter wheat planted in September and October. The rest is spring wheat sown in June. The outlook dimmed after fields dried up from Ohio to Texas to Montana and the government declared half of all counties disaster areas. The USDA, after predicting record corn harvests in June, said this month that output will plunge 13 percent this year after kernels withered.
“The really extreme drought has shifted westward,” said Dan Manternach, a wheat economist at Doane Advisory Services in St. Louis. “They’re doing some field work, but some have stopped field preparations because it’s too dry. That’s unusual because usually if it’s this dry, they say: ‘Let’s at least make a cloud of dust’.”
U.S. farmers may still plant winter wheat because most will be guaranteed $8.60 to $8.80 a bushel from insurance policies even if the crop fails, said Doug Etheridge, a senior vice president in futures and options at RBC Wealth Management in Charlotte, North Carolina. Before the drought sparked a rally, futures averaged about $7.16 this year through mid-June.
Surging prices may curb demand for U.S. grain and boost sales from Canada, the fourth-largest exporter, where production is rising for a second consecutive year. U.S. shipments overseas reached 5.69 million tons from June 1 to Aug. 16, 13 percent less than a year earlier, USDA data show. The government’s official forecast is for a 14 percent increase in sales in the year that began June 1.
World wheat supplies are “sufficient” to meet global demand even if Russia decides to limit exports, and prices may decline by the end of the year, Capital Economics Ltd. said in a report yesterday. In the year ended May 31, the top exporters were the U.S., Australia, Russia and Canada, USDA data show.
U.S. farmers may be depending on an emerging El Nino weather pattern to bring more water in the next several months. That may boost rainfall in parts of Texas, the second-largest winter-wheat grower, state climatologist John Nielsen-Gammon wrote in a report on Aug. 21. Winter wheat is planted from September through November, goes dormant when temperatures drop and resumes growing in April or May.
Plants may not survive that long without more rain, especially in Kansas. The southwest corner of the state has had three consecutive years of drought, leaving an increased risk of a return to the devastation of the Dust Bowl era in the late 1930s, according to Jim Shroyer, an agronomist at Kansas State University in Manhattan. Lack of crop production in the region means fewer plants and roots to keep the dirt in place.
“I’m worried about the dust starting to blow again,” Shroyer said. “I’ve heard people say that with our current farming techniques we’ll never have a Dust Bowl again. That’s a bold statement.”
No one is pointing to a return to the poverty of the 1930s. Along with crop insurance and emergency subsidies made available because of the drought, U.S. farmers have been transformed from subsistence growers to global suppliers. About 20 percent of the labor force worked in farming then, compared with less than 2 percent today, according to U.S. Census data.