Bumper Wheat Crop In Kansas?

Progressive Farmer:

This week, the Wheat Quality Council made its annual trek across Kansas, concluding with a meeting at the Kansas City Board of Trade in Kansas City Thursday afternoon when the final numbers were crunched and released to a waiting public. As DTN Markets Editor Katie Micik reported (and participated in), the tour's average yield came in at 49.1 bushels per acre as compared to last year's findings of 37.4 bpa (USDA later concluded 35 bpa), with 2012 the largest tour average of the last decade. As for production, using the 49.1 bpa resulted in an estimate of 403.9 million bushels. As Katie's story on DTN pointed out, tour director Ben Handcock thought the number was a bit high.

I would agree. Before the tour began, I gave Katie my rough estimate compiled from anecdotal "evidence" gathered from my discussion with various Kansas wheat growers over the winter and spring. Given the precipitation over the winter, warmer-than-normal temperatures, and an early break from dormancy, I put the average estimate at about 47 bpa. This would be just below the largest yield seen over the last 10 years of 48 bpa (2003), and the highest average yield on record of 49.0 bpa set (reportedly) in 1998. The 49.1 bpa would obviously be a new record if realized, though achieving this as an average could be made difficult by the recent move to hot, dry and windy conditions over much of the state.

A bit of simple fundamental analysis makes the crop situation even more interesting. First, let's assume USDA's March 30 prospective plantings number of 9.5 million acres is anywhere close to right (those of you who know my opinion realize what a large assumption that might be). Using NASS numbers for the last 20 years, the differential between harvested and planted acres has been approximately 91%, or in other words, 9% of the planted acres do not get harvested. Using those numbers would put harvested acres in Kansas at roughly 9.0 million.

This scenario makes the Wheat Tour's production number seem incorrect. If the crop averages 49.1 bpa on 9.0 ma, total production would be calculated at approximately 424.4 million bushels from 8.6 million acres rather than the above-mentioned 403.9 mb. The tour's production estimate implies harvested acres of 8.2 million, only 87% of what was supposedly planted. The last time the differential was close to this large was in 2007 when weather issues led to increased abandonment.

That'll put a damper on the wheat market. Or, I'll be wrong once again at how the market will react.