Commodity Trading: CBOT
Wheat Futures
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Supply / Production
Considerations
Winter
Wheat is planted in the fall, goes into dormant during the winter and is
harvested for grain during the following spring.
During ideal weather conditions for early fall growth, much of the
Winter Wheat (KCBT) grown in the southern plains is grazed by cattle prior
to the wheat entering dormancy for the winter. Wheat is usually planted in
September or early October when the soil is sufficiently moist to
germinate the seed. Late
season warm spells are a potential problem during planting, as the warmth
allow insects to survive long enough to eat the seeds. After planting, freezing temperatures and a blanket of snow
protects the seeds while they lay dormant awaiting spring thaw.
USDA/NASS
Crop Production Timetable
Early
warm weather is another hazard the seeds must face.
Early thaws followed by a frost can cause the soil to heave,
severing the stem from the root system.
Wheat traders watch the weather very closely in mid February for
signs of early thaws followed by frosts.
As Winter Wheat’s protective blanket of snow disappears, the
small Wheat shoots, which look like grass, begin to grow taller and begin
to form a head. The heads of
a Wheat stalk are small seeds or kernels which is what is milled into
flour.
During
the heading stage of development the Wheat crop is the most vulnerable to
damage. In order for Wheat to
head it must pollinate, which requires adequate precipitation as well as
seasonable temperatures. In
normal years, Winter Wheat pollinates in early May. Typically, as the Wheat crop becomes visible as the snowmelts
away and prices tend to decline. The
risk premium from heaving built into prices tends to erode quickly during
February. In March and April
as the crop is developing, fear grips the trading pits of Kansas City and
Chicago as the price of Wheat tends to rally on pollination concerns.
After pollination the crop completes its heading and is left to dry
in the heat of summer.
Like
other crops, Wheat uses most of its available resources in building the
head. Now the root system
will die and the grass-like Wheat begins to dry in the fields.
Excessive rains and below normal temperatures after heading is
complete have produced minor rallies in June on fears that the Wheat crop
is too wet and therefore will not have adequate protein content.
But these rallies tend to be little more than minor retracement
during the fall from the May highs to the pre-harvest lows of mid July.
The Winter Wheat harvest usually takes place from late May through early
September with the bulk of the crop being harvested between early June and
mid July.
Excessive
rains during harvest can slow down the harvest process, though very rarely
does yield suffer much in years with a protracted harvest.
The greatest damage to Winter Wheat during the spring and summer is
from disease. Hot and humid conditions create ideal growing for the
mold-based diseases, which have commonly afflicted Wheat in recent years.
However, outbreaks of Wheat diseases, such as karnel bunt, have
been very localized in recent years and probably do not present a real
danger to modern agriculture.
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