Texas and Oklahoma are suffering the worst drought in decades.
July was the hottest month ever recorded in Texas and the 12 months ending July 31 were the driest since record keeping began in 1895.
The drought slashed the size of the winter wheat harvest earlier this year and is pushing cattle into feedlots because there is no grass for them to eat.
The market is beginning to factor in the potential this fall for reduced winter wheat seeding in the U.S. southern plains.
Texas and Oklahoma account for a little more than a quarter of the usual hard red winter wheat acreage. Kansas, the largest hard red winter wheat producer, accounts for another quarter of the acreage.
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The extreme drought covers almost all of Texas and Oklahoma and extends into southern Kansas. You can see a map of the drought area at http://droughtmonitor.unl.edu/.
A dry fall in 2007, which was nowhere near as severe as the dryness now, caused winter wheat area in the three states to fall to 20.9 million acres, down seven percent from 22.5 million the year before.
Seeding usually begins in September but there is a fairly long window available and much will depend on whether the drought breaks this fall.
The La Nina that helped cause the drought that has gripped the region for a year has dissipated but some weather models indicate that it could reform again later this fall. There also are models that show it won’t.
The southern plains drought is only one factor in the wheat market. The biggest issue is the much improved crop in the Black Sea region. After being out of the market for the past year the region is back now, hotly competing with prices below those of North American wheat.
The improved outlook for Black Sea wheat is the main reason for the United States Department of Agriculture’s increase to world wheat production for 2011-12 to 672.1 million tonnes from 662.4 million in the July outlook.
Another market factor is that Canada’s wheat crop will likely be bigger than expected earlier this summer, but quality is still unknown as harvest will likely stretch into the fall because of the late seeded crop.
Quality is down in Europe where rain in the past week stopped the harvest and downgraded the crop.
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