Kansas farmers will not harvest 30% of winter wheat, and US processors buy wheat from the EU

Reuters reported after a three-day crop tour of Kansas that farmers in the state are refusing to harvest drought-damaged winter wheat crops and even deliberately treating fields with crop-killing chemicals to get higher insurance payouts because the grain cannot be harvested due to the low location of the ear. Some farmers give their winter wheat fields to cattle grazing.

Reductions in harvested acreage will reduce U.S. wheat production and reduce stocks to a 16-year low. According to the US MSF, farmers plan to abandon the harvest of 33% of winter wheat crops, which is the highest rate since the First World War. Kansas farmers are projected to leave 19% of their winter wheat crop unharvested, compared to 10% last year and 4% in 2021. However, grain market participants warn that this figure could actually be even higher. Now the situation is similar to that in 1989, when farmers did not harvest 28% of the wheat sown.

According to USDA’s weekly Crop Progress report, U.S. spring wheat is 64% planted, compared to the 5-year average of 73% as of this date. The number of crops in good or excellent condition for the week increased by 2% to 31% (28% last year).

Against the background of problems with delivery and the high cost of internal logistics, flour milling company Ardent Mills, located in the USA, recently purchased 7 batches of Polish and German wheat. “It’s cheaper to ship wheat to the US east coast from the EU than from Kansas,” traders reckoned, as Kansas wheat prices are $100/t higher than the EU and freight costs from Northern Europe to Florida, where Ardent Mills is located , is $20-30/ton.

Polish wheat with a protein content of 12.5% and delivery in September is being offered on Euronext at €221/t, which, including a premium of €9/t, is equivalent to $250/t FOB Poland. While HRW hard red winter wheat is trading at $310/t, which is $350/t FOB US Gulf, and rail costs are as high as $20/t, making it uncompetitive compared to European grains. The New York state-based Ardent mill has also closed its feedstock needs through the end of 2023 thanks to supplies from Europe. According to the Agricensus Export Dashboard, in January 2023, 32.7 thousand tons of Polish wheat were delivered to the USA, which was not observed during the last 10 years.

Market participants expect an increase in wheat supplies from Europe to the East Coast of the United States, as the wheat harvest in Kansas due to drought will be the worst since 1957 and will amount to only 4.84 million tons.

Tags: USA, crop condition, crop forecast