Analysts at Australia & New Zealand Bank have hardened their forecast that Kansas-traded wheat risks becoming a market "flashpoint", according to AgriMoney.com. The bank warned that the La Niña weather pattern has increased the chances of a poor crop this year.
The turn in the so-called southern oscillation index, one of the key indicators of a La Niña, to a historically high reading of 44 has lifted the chances of a poor start for America's hard red winter wheat crop.
Indeed, the index, which measures the difference in air pressure between Tahiti and Australia, has a statistically significant link with production of the wheat variety, the type traded on the Kansas exchange, and of which Kansas state is the top grower.
"The southern oscillation index has been as good a predictor as any for Kansas wheat production," the bank said.
"In about two-thirds of cases over the last 100 years, the world-ranked Kansas wheat production years have been preceded by a La Niña or strongly positive southern oscillation index in November and December.
"A strongly positive index has skewed the odds that Kansas and U.S. hard red winter wheat production will be significantly lower year on year."