Kenneth Failes, who farms 850 acres near Cherokee, Oklahoma, said as much as 40% of his wheat didn’t emerge from the dry soil before the start of freezing weather and is lost. Growers in the southern Great Plains may abandon as much as 25% of their hard, red winter-wheat crop, the most since 2003, according to Mark Hodges, the executive director of Plains Grains Inc., a marketing company in Stillwater, Oklahoma.
Global production will drop 5.9% to 655.11 million metric tons in the year ending May 31, the USDA estimates. Inventories are declining for a third year and will be at the lowest level relative to consumption since 2008, when wheat prices surged to a record $13.495 in Chicago.
Rain in the next 60 to 90 days would revive some crops and prevent further damage, said Lane Broadbent, a vice president at KIS Futures Inc., a commodities brokerage in Oklahoma City.
“Wheat is such a hardy plant, it can look pretty bad and turn into a crop,” said Broadbent, who also co-owns a 400-acre wheat farm. “It’s not as catastrophic as if it were the middle of February or March.”
That may be the view of some of the hedge funds and other large speculators who expect prices to keep dropping. They held a net-short position of 11,899 futures and options contracts by Dec. 24, U.S. Commodity Futures Trading Commission data show. That’s from a record net-long position of 80,827 on Aug. 7.
Chicago futures fell for a third consecutive month in December, dropping 9.9%, before trading at $7.5425 today. Prices for hard, red-winter wheat on the Kansas City Board of Trade slumped 9 percent last month to $8.31 a bushel. The USDA raised its estimate for global reserves by 1.6% from a month earlier on Dec. 11, after raising its production estimate and reducing the demand forecast.
The Dust Bowl that ravaged Great Plains states in 1934, 1936 and 1939 was the result of farming practices that left soil unprotected from sustained drought. High winds carried loose dirt into the sky, creating storms referred to as “black blizzards,” according to the National Climatic Data Center.