(Bloomberg) — U.S. wheat fields have been so stricken by drought that farmers are now ready to abandon crops at the highest rate in more than a century.
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The US Department of Agriculture said Friday that growers expect to harvest about 67% of their planted acres. If realized, it would be the lowest crop ratio since 1917, the agency said in a monthly report.
Years of dry conditions on the American plains have taken their toll on America's famous grain fields. Some wheat plants this season were so dwarfed by lack of moisture that they would not produce so-called grain heads, leaving no reason to cut them. Farmers can instead file crop-insurance claims for the failed acres, or choose to plant something else. Next week, an annual tour in the top wheat-growing state of Kansas will allow analysts to survey fields and estimate production.
“We have small wheat, thin stands, some wheat that looks really good and a lot of fields that are not going to be harvested,” Justin Gilpin, chief executive of the trade group Kansas Wheat, said of next week's harvest. Travel
The USDA estimates that the higher rate of abandonment will drag US wheat supplies down to lower levels than analysts expected. This could keep domestic prices high, despite the potential for rival producers such as Canada and Argentina to boost production.
Futures for hard red winter wheat, the variety grown in drought-prone states including Kansas and Oklahoma, rose as much as 6.9% after the data was released. This is the biggest intraday gain for the most active contract since October.
Read more: USDA WASDE Crop Report for May: Toplive Transcript
Meanwhile, US corn production is expected to rise to a record high, boosting global grain supplies and providing relief to livestock producers hit by rising feed costs.
Corn futures were little changed. Traders were forced to exit short positions after a “shocking” wheat production estimate, Charlie Sernetinger, head of grains at Marex Capital, said in a note.
— With assistance from Megan Duresin and Dominic Carey.
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