As noted earlier today, the USDA came out with the planting progress report as of Sunday May 20th and things are looking better despite the slow start to the planting of the 2018 crops.
Corn planting progress was reported at 81% complete as of Sunday, now matching the average pace and 1% behind last year. The crop was also shown at 50% emerged, moving ahead of the average 47%.
U.S. producers are now 12% ahead of the average pace for soybean planting progress at 56% complete. The crop was also 25% emerged, with the normal pace at 15% for this date in time.
The USDA’s report indicated that the winter wheat crop was 61% headed on Sunday vs. the average 64%. Condition ratings showed stead at 35% gd/ex (Good/ Excellent). Planting of the spring wheat crop tallied at 79%, just 1% behind the normal pace. The spring wheat crop was 37% emerged, with the average at 37%, right on schedule.
With Wheat selling off from the overnight gap higher on Sunday night, I’d like to dive deeper into the conditions report outlined by Brugler Marketing and Management, LLC.
So far this year, winter wheat conditions have been pretty dismal compared to past years… At week 20, we are just 7-8 weeks from most of the crop being out of the fields. In fact, some producers in Southern Texas have already started.
What does this mean for the potential yield from this crop?
As you can see from the graph below, this year’s ratings are fairly low. They started out the worst in the past 16 years and were the third lowest since 1990. That has set the tone for the year, as ratings have not gotten a whole lot better since then. However, they may be doing slightly better than the average trend would suggest.
Normally ratings will drop of into the final weeks of the year (see the dotted line). This year, however, they have recovered a little from conditions earlier in the year. That has been caused by a mix of things ( mainly weather).
Taking a look at the individual factors that are affecting the wheat conditions this year in further detail.
One explanation is by looking at the different classes of wheat (SRW and HRW). HRW is typically grown in the Southern Plains, while SRW is grown in areas that see more moisture. The HRW graph below shows the ratings for CO, KS, NE, OK, and TX. You can see that the overall HRW conditions took a dip, but are back where they started at 278.
Ratings in NE and CO have consistently stayed above 300 ( scale from 100-500), with NE closer to the 350’s, while the Southern Plains states are sub 250 ratings. The drought from last winter continued to plague that area, especially in the western parts.
By correlating historical yields to the currents ratings, we get an r-squared of 0.5244. That is not as high as we would like to seem but it is tighter than the overall winter wheat correlation of 0.0866.
Using that relationship, we would get a final yield of 36.26 bushel/acre for HRW. That would be a 6.28 bpa (bushel per acre) drop from the previous year, and on fewer acres this year would drop production quite a bit. Compared to the past 20 years, it would be the sixth worst. This is still the 20th week ad the correlations tend to get stronger as the year progresses, but we are looking for a significant drop in yield.
Moving to the Soft Red Winter Wheat.
We find the average SRW ratings by taking AR, IL, IN, MO, MI, OH and NC condition ratings. As with the HRW ratings, conditions will tend to drop into the last weeks until harvest. This year though, they are getting a nice boost in the spring months, nearly following 2015 to a T.
This (SRW) is the main reason that the overall winter wheat ratings have gotten a little better over the past several weeks. Currently conditions are at 371, after starting at 357. The r-squared correlation between the Week 20 SRW ratings and its respective final yield is 0.2219.
That is much weaker than the HRW r-squared. With the equation given we would expect to see a final yield of 60.26 bpa, in the top half of the past 19 years.
With that weak correlation there is a large standard error, i.e. you can miss by a mile. Ratings this year are better than they were the same time last year, but that best fit yield would be 7.5 bpa lower. This shows that with a weaker correlation, projecting a yield at this point is not very reliable. We think it will be higher.
At this point in the year, trying to correlate yield with conditions would be just slightly better than throwing a dart at a dart board. We do know that the overall yield will likely be lower than in past years, just based off how poor the conditions have been to date. The projected HRW yield would not be surprising, especially since the Wheat Quality tour showed an expected yield of 37 bpa for top producer Kansas. The SRW yield projection is less likely to be the right one, given the lower r-squared and the fact that conditions are better than last year but projected yield is worse. We should have a stronger handle on crop size in a couple weeks
NASS reported that 52% of the cotton crop in the U.S. was planted as of Sunday. That was a 16% jump from last week and is now 7% ahead of the average.