The decline of the US spring wheat crop amid scorching weather has been the clear feature of the US wheat market in recent weeks, driving futures on the Minneapolis Grain Exchange to 10-year highs last week.
However, grain analysts lack consensus on what the US Department of Agriculture will do in its first spring wheat production estimate for 2006 this week. The spring wheat figure will be key for the wheat trade when the USDA updates its US and world supply and demand forecasts on Wednesday.
While the USDA last month reported a 4 percent increase in US spring wheat plantings for 2006, analysts are divided on whether the government will project a larger or smaller crop compared to last year, given the harsh conditions in the northern US Plains production belt so far this summer.
"Spring wheat is going to be a toss-up this time, because we're in a major reproductive stage of growth," Prudential Financial analyst Shawn McCambridge said.
"While (the USDA) will recognise that we have some poor conditions up in the northern Plains, I don't think they are going to jump on dropping the yields drastically," he said.
The average estimate for US spring wheat production among analysts surveyed by Reuters was 490 million bushels, a drop from the 505 million bushels produced in 2005.
But estimates ranged from 420 million to 530 million, with about half of those surveyed predicting a larger crop than 2005 and half predicting a smaller crop.
Those predicting a bigger crop noted the acreage increase, and cited wheat's reputation as a hardy survivor known for rebounding from dire circumstances. They also expected the USDA to take a conservative stance this month, waiting until the August crop report to project any major drop in production.
On the other side were those who forecast a smaller crop, citing a steady decline in weekly spring wheat condition ratings throughout June as hot and dry weather kicked in. The USDA late Monday said 42 percent of the US crop was rated in good to excellent condition as of July 9, down from 52 percent the previous week and 69 percent in early June.
"There is a lot of that crop that's hurting and probably won't be harvested. It's developing ahead of schedule, just like the (hard red winter wheat) did, and it's going to be a sign of lower bushels," one Minneapolis wheat trader said.
The weather woes in spring wheat country follow a drought that slashed the US harvest of hard red winter wheat, the largest US wheat class, tightening US stocks of the raw material for bread flour.
The production concerns sent spring wheat futures on the Minneapolis Grain Exchange soaring to 10-year highs last week, with front-month July reaching $5.36 a bushel.
Analysts predicted that USDA would make only minor adjustments in its winter wheat estimates this month, trimming its forecast for hard red winter wheat and raising the figure for soft red winter wheat.