Drought or Flooding: Mother Nature is determined to disrupt the Wheat Crop - May 19th

Drought or Flooding:  Mother Nature is determined to disrupt the Wheat Crop

May 19^th, 2011

One way or another, wheat crops around the world are suffering from adverse weather conditions.  Some areas are struggling to get the crop planted amidst major flooding, while others are seeing their crop whither in extreme drought.  While global stockpiles are substantial, and there does not seem to be any prospect of a serious shortage, this year’s crop seems doomed to disappoint.

Spring Wheat Planting

Farmers in the Dakotas are having a very difficult time planting this year’s crop of spring wheat (the variety traded in Chicago).  As of last week only 36 percent had been seeded, compared to the 10 year average of 75 percent.  The outlook for progress in the coming week seem dim, as there is more rain in the forecast, and anecdotal reports from farmers indicate the soil moisture has staying power, so it would take an extended dry period to facilitate planting.  Similar conditions exist in the Canadian prairies.

Winter Wheat in the Southern U.S.

Farmers in the South, specifically in Texas and Oklahoma, would probably love to have the problems of their colleagues to the north.  Drought conditions in some areas are the worst in decades, and crop has suffered as a result (this being Hard Red Winter Wheat, the variety traded in Kansas City).  As of last week, the USDA reported that only 32 percent of the crop was rated good or excellent, a worsening from the week before, and well below the ten year average of 48 percent.  44 percent of the crop is rated poor or very poor, which is the worst reading on record for this reporting period after 1996, when 46 percent was in bad condition.  While there have been some scattered showers, it is unlikely that the crop will show significant improvements at this stage in the season.

International Droughts

France, which is the largest producer of wheat in the EU, is experiencing a serious drought, with the driest April since 1953.  As a result they are expecting the size of the crop to decline by 12 percent from last year, to a four year low.  Production is forecast at 31.65 million metric tonnes, down from 35.7 million metric tonnes last year. 

To the east, there are similar conditions being reported in China.  In central Hubei province, they are experiencing the worst drought on record.  China is largely self-sufficient in wheat, so if they had to turn to the world market for significant imports it would be a very bullish development.  Hubei province however is not a very large wheat producer, so this drought may not have too big of an impact.

-Jaime Macrae, CIM

Account Executive, Friedberg Mercantile Group

jmacrae@friedberg.ca