Grain bulls should temper their enthusiasm at the surprisingly low level of US winter wheat sowing.
The extent of the decline in US plantings of the crop ahead of the 2017 harvest has certainly improved wheat price prospects.
But it’s not, on its own, a game changer. More upsets will be needed to world wheat production potential to drive prices into a high gear.
The US Department of Agriculture data showed US winter wheat area down 3.75m acres year on year, to a 108-year low of 36.14m acres, looks like putting dent on US supplies.
But there would still be plenty to go round, given the size of US inventories, which the USDA expects to end 2016-17 at 1.19bn bushels (32.3m tons), the highest in 29 years.
Factor in the typical area loss before harvest of 15% over the past five years, and the average US wheat yield of 46.6 bushels per acre over that time, and the US looks set to lose some 150m bushels (4.1m tons) in output potential.
Winter vs spring
Stocks would still close 2017-18 at the second highest in three decades, and stand well above the recent low of 590m bushels (16.1m tons) seen in 2013-14, when US farm gate prices set a record season high of $7.95 a bushel.
And there is good reason to think the drop in production would not be so large. Most of the cut to sowing has come in hard red winter wheat, a lower yield type (with a five-year average of 39.2 bushels per acre). So far this century, US spring wheat sowing have moved the opposite direction in winter wheat sowing 12 times, coinciding only five times.