By Lester Aldrich
KANSAS CITY (B)--Market analysts are still debating the seriousness of the U.S. Department of Agriculture's latest estimate of winter wheat plantings--the lowest acreage since 1971. Some are calling it significant for potential production and deferred futures prices, while others say it does not necessarily mean anything if the weather cooperates.
On Jan. 11, USDA's Agricultural Statistics Service said about 41.3 million acres were seeded to winter wheat, a 5% drop from 43.3 million in 2000 and 1999. Hard red winter wheat planted area was pegged at 28.9 million acres, a 5% decline. Soft red winter seeded area also is down to 8.9 million acres, a 6% drop from a year earlier.
Bill Nelson, grains analyst for A.G. Edwards & Sons, said the acreage decline points toward tightening supply/demand ratios for producers and buyers, eventually leading to higher wheat prices.
Each year, some winter wheat fields get planted but are never harvested. Nelson's abandonment forecast is 7.5 million acres, down from last year's 8.3 million, when an extra 1 million were abandoned in Texas from drought. In 1999, 7.8 million acres were abandoned. Rain in late fall could benefit this year's wheat fields, making them attractive to harvest and less abandonment.
The harvested acreage forecast brings Nelson's total winter wheat production call to 1.530 billion bushels, down 33 million from last year's 1.563 billion. Of this, hard red production comes in at just more than 850 million bushels, marginally higher than last year's 844 million.
USDA also forecast total hard red winter wheat use for the 2000-01 crop at 942 million bushels, and it could be more, Nelson said. Even though this is less than the 1.028 billion bushels estimated for the 1999-2000 crop year, it could be enough to cut hard red carryout stocks again and support new-crop Kansas City Board of Trade futures.
>He expected soft red winter wheat production to be 435 million bushels, compared with 471 million in 1999-2000. This also could be low enough to lead to tighter carryout and support new-crop Chicago Board of Trade futures.
Acreage projections for spring wheat are about unchanged from last year, Nelson said. Firming prices could increase the desire to plant more, but a 2-million-acre jump in conservation reserve program acreage, 700,000 of which was in spring wheat states, could put a damper on plantings.
Acreage estimates put Nelson's total wheat production forecast at 2.175 billion bushels, down 48 million from 2.223 million in 2000. This could result in a carryout of 569 million bushels compared with USDA's 814-million estimate for this year.
>Some market analysts, though, say one timely rain event could mean a billion bushels of production and offset production cuts caused by lower plantings. It is too early, they say, to be banking on reduced wheat production.
Nelson said he acknowledges that growing-season weather, and even spring wheat plantings, could affect the final wheat production figure. However, the Kansas Agricultural Statistics Service, in its monthly crop condition report Jan. 29, indicated wheat condition had declined from the previous month. As the crop condition worsens during winter, it makes it harder for favorable weather conditions to offset the planted acreage.
That report put the percentage of fields rating poor or very poor at 29%, up from 20% on Jan. 2.
Texas, which suffered a severe drought last year and had its harvested acreage cut as a result, rated its wheat this week at 33% poor or very poor. During the week of Jan. 9, the rating was 29%.
Brian Hoops, market analyst for Farmers Options & Hedging Services Inc., said he expected planted acreage for winter wheat to be 41.3 million, with harvested acreage at 33.5 million for an abandonment of 7.8 million.
Hoops projected winter wheat production from that 33.5 million acres at 1.465 billion bushels on a yield of just over 43 bushels per acre.
Combining production from other wheat in the United States and a total use of 2.515 billion bushels leaves forecast carryout stocks for all wheat for the 2001-02 crop year at around 575 million bushels, Hoops said.
>That could indicate CBT and KCBT Dec wheat contracts are undervalued, Hoops said. Both could see 40- to 60-cent-per-bushel rallies on production concerns, pushing CBT Dec to $3.80 or even $4.00. KCBT Dec could see $4.25 to $4.45 if price ratios remain constant.