By Kevin Marcus, Agricultural Meteorologist, Marcus Weather Inc.
July 19, 2002
Weather related problems in several key areas are combining to erode the world production outlook for wheat, feed grains and oilseeds pushing the trade into a scenario of sustainably higher prices. Already a rapidly weakening dollar has contributed to some inflation of U.S. commodity prices, but the second shoe to drop will come from a further tightening world balance in several commodities.
Early El Nino impacts are being felt in Asia as a weaker than normal monsoon over India and SE Asia is in progress and threatens losses to several key exportable crops. Dry weather has also plagued parts of the North China Plain, Ukraine and Russia as well as the E. Europe and Turkey. Except for India, none of the crop problems are threatening any major crop loss, but taken collectively does result in some significant implications for work trade in 02/03.
Red Flags (Warning: Declining Crop Prospects)
Canada – Minimal rains in the northern half of the Prairies grain belt has mean that 20 to 40% of the wheat, barley, oat and canola crop is experiencing the second consecutive year of one of what is probably the worst multiyear drought episode in 100 years. Rains at this stage cannot reverse the damage. Canadian production will little changed from last year for each crop except oats which will have an increased harvested area of about 30%. Exports of all commodities will remain low for another year.
U.S. Wheat – As harvest finishes up for one of the worst winter wheat crops in the past 30 years, hopes for a silver lining from improved spring wheat production has been dashed by episodic high heat and drought. Yield expectations for spring wheat have dropped from the high 30s bu/ac to the low 30s, about a 20% drop in the past month and Hard Red Spring will struggle to break 400 m bushels with a total U.S. wheat crop of just over 1.7 B Bushels compared an historically low 1.96 B bushels last year.
India/Pakistan – The monsoon delivered rains to northwest India and Pakistan are failing this month leaving crop areas vulnerable to heavy losses. This includes groundnuts, soybeans, and next year’s rapeseed, wheat and sugar crops. There is still a little time for rains to revitalize and minimize crop damage, but there is currently no sign of that development.
Australia – Dry weather continues to plague eastern wheat and sugar areas. All forecasts for the next Australian wheat crop could have falled to near 20 mmt in 02/03 (compared to the earlier estimate of 24.5 mmt)
Yellow Flags (Watch: Below Average or Declining Crop Prospects Possible)
Ukraine/Russia – A predominantly warm and dry pattern over much of the Ukraine and Russian Volga Valley has resulted in reductions to winter wheat and is now beginning to impact corn, sunflowers and sugar beets. No major crop failure is seen, but need for imports are rising for feed grains, while exportable wheat supplies are dropping.
East Europe – Drought continues over Romania, Hungary and Bulgaria and has developed over the past month in Turkey, despite some episodic rains. Wheat crops have already been reduced and now a continued dry pattern threatens corn and sunflower production.
Malaysia/Indonesia – Although rainfall has been favorable on the peninsula of Malaysia where most of the palm oil is produced, East Malaysia (Sabah, Sarawak) and most of Indonesia have turned drier than normal (even though it’s officially the dry season). The development of an El Nino is likely to result in below normal rainfall over the next 6 to 9 months for this area that produces 80% of the world palm oil. Palm oil production in calendar 2003 is likely to decline from 2002 by as much as 10%.
China – Episodic heat and dryness has reduced corn and soybean yields this month in the North China Plain and parts of Manchuria. Near term rains may limit the loss, but return of hot temperatures in late July could negate any temporary improvement. Corn production estimates which have peaked in the 125 mmt range, are now dropping back below 120 mmt.
U.S. Corn and Soy – After a wet start delayed corn and soybean planting and induced shallow rooting a quick turn to warmer and drier than normal conditions during late June and July has reduced yields from earlier expectations down to just below trend and threatens further reductions. One of the differences in the drier pattern that is more threatening this year than last year is the accompanying higher temperatures.