Prairie drought adding to producers’ crop weather woes

Could this be the year that drives down those burdensome global grain stocks that keep crop prices low?

Early signs indicate substantially reduced production but demand problems associated with African swine fever sweeping Asia and trade barriers also must be considered.

In recent years there have been pockets of weather problems, but not large enough to make a difference to global production.

You can’t write off crops in June, but this spring is presenting more challenges than usual over hugely important areas.

There are serious weather problems across Canada and the United States, Australia is looking at a second dry year that could crimp production and dryness is creeping into the forecasts for Ukraine and southern Russia.

Much of the Canadian Prairies is going through one of the driest springs in the 100-plus years of Environment Canada records.

And the heat wave of recent days didn’t help matters.

Environment Canada’s Dave Phillips said Saskatchewan on average has been much drier than normal for three years. In the past 33 months, the province had less than half the precipitation it would normally get, he said.

The Saskatchewan Agriculture crop report to May 27 said the topsoil on 20 percent of crop land was very short, 48 percent short and only 32 percent adequate.

The Alberta crop report to May 28 said 12 percent of topsoil had poor moisture, 27 percent fair, 52 percent good, eight percent excellent, and one percent excessive.

Huge areas of central and western Saskatchewan, eastern and northern Alberta and Peace River country had received less than 20 millimetres of moisture in April and May. Many parts of those areas got almost nothing.

The dryness led to a quick seeding season, but those crops now desperately need moisture to get established.

On June 3 the forecast showed potential for rain and cooler weather June 8-9 but forecasts for the whole month did not leave the impression of a wet trend that would make up for the current deficit. Summer June-to-August forecasts from Environment Canada and the Weather Network show the expectation for near normal rainfall across the prairie grain belt, except for areas along the United States border in southwestern Saskatchewan and southeastern Alberta where there is a probability for above normal rain.

All the moisture this spring has been concentrated south of the border with huge areas of the Midwest U.S. flooded or too muddy to allow seeding. The excess rain is also harming the U.S. winter wheat crops.

A Bloomberg survey of 10 traders and analysts showed that U.S. farmers could file prevented planting claims on six million acres of corn. I think that is too optimistic and in reality the unplanted corn acres will be much higher. But if the Bloomberg number is correct, that would amount to 6.5 percent of the 92.8 million acres of corn that American farmers expected to seed in the March Prospective Planting report. Using the USDA’s forecast average yield of 176 bushels per acre, that would be about a billion bu. of lost production. Lots of soybean acres won’t be seeded either.

No one knows what will actually happen but many U.S. farmers close to throwing in the towel.

As of June 2 only 67 percent of the corn crop was in the ground, the lowest ever for that date and well off the usual rate of 96 percent. That means that 33 percent or about 30 million of the originally expected 92.8 million corn acres, had still not been seeded. Only 39 percent of the 84.6 million expected soybean acres had been seeded. Normally 79 percent is already in the ground. That too is the slowest planting progress on record.

The Midwest rain is expected to continue into the first week of June. The situation is desperate.

And add to this the potential for lower overall yields because of poor establishment on mudded-in fields and increased disease pressure.

U.S. winter wheat still has a better condition rating than last year at this time but worries are mounting that soggy soil could push back harvest. Rain was forecast for much of Oklahoma and southern Kansas with heavy accumulations in Missouri in the first seven days of June.

These various weather problems have generated a rapid change in market sentiment. In early May all the talk was of the trade problems with China and the prices of many major crops hit multi-year lows.

The big funds all held short positions but have had to cover those shorts as each week brought excessive rain to the Midwest and planting delays.

Corn futures benefitted the most. From May 1 to June 3, December corn rallied 14.4 percent. December hard red spring wheat rallied about nine percent. November soybeans rose 3.8 percent, soy oil fell one percent and canola rallied about four percent.

This has not yet pushed prices to levels considered high. The worries about the weather must continue for the futures markets to boil higher and offset the mounting headwinds from trade problems.

The administration of U.S. President Donald Trump created another trade issue on May 31 when the president threatened to impose tariffs on Mexico by June 10 to force it to curb the flow of migrants from the south.

American farm groups worry the action would cause Mexico, a major buyer of U.S. corn and pork, to impose retaliatory tariffs on those food products. It would also make ratification of the new Canada-U.S.-Mexico trade agreement much more difficult.

And ASF keeps on spreading. It is now in Vietnam and North Korea, in addition to China, and as it takes a toll on those hog herds, it is slashing demand for feed stuffs including soybeans.

As demand fades and the China-U.S. trade war heats up again, don’t expect China to make any more “goodwill” U.S. soybean buying commitments in the foreseeable future.

So the problems mount on both sides of the supply-demand equation.

But at this point the bad weather is the stronger of the two factors and could become the dominant agricultural story of 2019 if improvement is not seen soon.

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