With the U.S. harvest poised to pick up steam in the next two weeks, the U.S. winter wheat ratings took another tumble ahead of USDA's June 11 crop report.  Although the wheat crop appeared to recover following the Easter weekend freeze, the U.S winter wheat index has declined 16 points the last few weeks to near this year's lowest value at 340-as early harvest reports last week were lower-than-expected in both the Southern Plains and the Delta. This was also reflected in the good/excellent ratings in some of the major producing states, with KS and OK declining 4% and 9%, respectively, and AR dropping 21% after a dramatic 41% increase the previous week. Overall, the U.S. top two rating categories are now at 53%, 1% below the April 22 low. Still, this year's crop remains substantially better than last year's, which only had a 27% good/excellent rating on this date.

Because of recent freeze insurance claims in OK and heavy rains in the Plains, the USDA could decrease this year's hard red wheat harvested acres by 400,000 acres when its re-surveys producers this month. This could result in slightly smaller crops in OK and TX, but excellent prospects in the western and northern hard red producing areas will likely lift this variety's output to near 1.029 billion bu. Dryness in the Delta and SE and a limited recovery in soft red crop ratings in MO, IL, and IN the last month suggest harvested acres could be cut another 110,000 acres this month-with yields also off slightly, resulting in a 9.5 million bu. drop to 337 million this month. Recent dryness and high temperatures in WA and OR also caused ratings to slip, prompting us to decrease June's white wheat estimate by 2.6 million to 238 million. Overall, a U.S. winter wheat crop of 1.605 billion bu. ,(down 10.5 million from May) is now expected on next week's report with U.S. yield of 43.8 bu./acre.

With spring wheat seeding completed, last week's rains boosted g/e ratings 6% to 85% this week. However, the USDA will likely use its previous 558 million spring estimate to bring its June U.S. wheat crop to 2.163 billion bu. because of Northern Plains' crop uncertainties yet  this season. This spring's strong export shipments appears to have achieved the USDA's 910 million bu. forecast, so the 2006/07 balance sheet isn't likely to be adjusted this month. However, the current high prices do suggest that 2007/08's feed demand could be cut by 30 million bu., resulting in a 10 million bu. rise in ending stocks to 479 million bu., even if the total U.S. crop is slightly smaller.

Despite this year's higher U.S. output, current dryness in the FSU and China and 2007/08's further tightening of world stocks suggest that U.S. producers should keep new-crop sales at our current 50%-55% level. But, be prepared to advance marketings if emotions boil prices to the $6 area on Northern Hemisphere production concerns.

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