May 17, 2012

 

Drought in US, Russia trigger fears for grain harvest

 

 

Anticipations for a record US winter wheat crop, and bumper plantings of the follow-on soy crop, have all been given doubts due to a lack of rainfall.

 

There are also worries on Russian grains.

 

Wheat prices revived on Tuesday (May 15), rebounding back over US$6 a bushel in Chicago, after an official report showed the condition of the crop in Kansas, the top US wheat-growing state, falling significantly in the week to Sunday thanks to a lack of moisture.

 

"Since precipitation continued to be scarce in many of the principal wheat growing districts, the condition of the wheat crop continued to decline," the USDA said, estimating the crop 52% in "good" or "excellent" condition.

 

While a significant advance on the figure a year ago, when dryness was of substantially greater concern, they were below the proportion of 60% a week before.

 

The data raised concerns over forecasts for the Kansas, and US, winter wheat crop raised two weeks ago by a crop tour which estimated that the state was in for its best yield for at least 30 years, but warned that "timely rain is needed, especially in the south western and south-central region of the state for the drought-stricken crop to improve".

 

Only last Thursday, the USDA estimated the domestic yield of winter wheat, of which Kansas typically accounts for roughly one-quarter, at a "near-record high" of 47.6 bushels per acre.

 

However, on Tuesday, Australia & New Zealand Bank analyst Paul Deane said: "In Kansas, much of the state received 0.5-to-1.0 inch below-normal rain during the week.

 

"Topsoil and subsoil moisture declined, and lack of precipitation continues to be a concern among many producers."

 

At Benson Quinn Commodities, Brian Henry said: "Recent hot temperatures and minimal rainfall has the Kansas crop going backwards at a pretty alarming rate."

 

And the US broker warned of the potential impact on sowings of so-called "double crop" soy, planted after the winter wheat harvest, and which had looked set for a large acreage given the early development of winter wheat, of which harvest has begun in southern areas.

 

"Dry conditions in the southern plains are starting to become of concern and could impact double crop bean acreage if rains do not develop shortly," the broker said. "Crops will need moisture in the extended outlook."

 

The data belied what was otherwise a strong set of data for soy in the USDA's weekly Crop Progress report, showing sowings 46% completed as of Sunday, compared with an average of 24%.

 

Some 16% of soy had emerged, three times the normal proportion.

 

Concerns over dryness are also continuing to increase in the former Soviet Union, where rainfall is an especially sensitive topic given the drought two years ago which depleted harvests and forced export curbs.

 

Agritel noted "fears about water deficit" in the Volga, Urals and Siberia regions of Russia, where temperatures 5 degrees Celsius above average had stoked concerns for moisture, if encouraging crop development.

 

"Crop sprouting is good until now, but the lack of rain could cause damage," Agritel said.