Good weather, potentially poorer prices during recovery

While crop prices are weighed down by favourable prospects so far for global production, there are pockets of trouble providing hope for modest price support in certain commodities.

European production in particular is struggling, raising hopes for another year of strong imports of Canadian canola, but on the global scale those troubles are balanced out by good crop conditions in the United States, Russia and elsewhere.

An expected production rebound in Australia means renewed competition in markets where that country has been at a disadvantage because of a disastrous 2019.

In Western Canada, production prospects are split between normal to excessive moisture in Alberta and western and northeastern Saskatchewan and marginal to exceptional drought in eastern Saskatchewan and most of Manitoba.

Rain expected this week on the Saskatchewan-Manitoba border region would be most welcome.

Many crops across the West are behind normal development because of the cool spring.

It is early yet to make broad pronouncements about production on the Canadian Prairies.

Last week the International Grains Council raised its monthly forecast of global wheat production by two million tonnes to 768 million, up from last year’s 762 million.

It sees year-end stocks at 290 million tonnes, up from 274 million last year.

However almost all of the stocks increase happens in China. Wheat stocks held by the U.S., Canada and the other major exporters do not increase.

IGC raised the global corn production forecast to 1,172 million tonnes, up three million from last month and up 55 million from last year.

It sees global year-end stocks at 296 million tonnes, up eight million from last month but down three million from last year.

Its stocks number differs quite a bit from the United States Department of Agriculture’s global forecast, which sees a substantial year-over-year increase in corn stocks, with the biggest accumulation happening in the United States.

This build up in projected domestic corn stocks is contributing to weak corn futures prices.

Expectations for a huge U.S. corn crop are bolstered by the good condition of crop.

As of June 21, the amount of corn assessed as good to excellent was 72 percent, up from 56 percent last year and the 10-year average of 69 percent.

Last week, Chicago December corn futures at one point dipped below US$3.30 per bushel, retesting the multi-year low previously set in April.

The condition of the U.S. soybean crop is also well above last year and the 10-year average, weighing on its price.

The U.S. winter wheat harvest is about a quarter complete and production will be less than last year. The spring wheat crop condition June 21 was equal to last year but dry weather in North Dakota was taking a toll on that major producing state. However the Dakotas were expected to get rain this week.

Crops in the European Union had a rough winter and spring, depressing production prospects.

The European Commission pegs soft wheat production at 117.2 million tonnes, down from last year’s strong crop of 130.9 million tonnes.

Durum yields are also depressed, falling 4.6 percent behind the five year average, according to the European crop monitoring organization.

The European cereal trade association COCERAL pegged the durum crop at 7.4 million tonnes, down from 7.5 million last year. The crop in France is down the most while Italy’s crop is about the same as last year.

As for rapeseed production, the EC forecast is 15.41 million tonnes, little changed from 15.36 million last year, but down 19.5 percent from the five -year average, due largely to reduced acreages compared to historical norms, but also yield problems.

The EU expects the bloc will import 5.5 million tonnes of canola/rapeseed in 2020-21, down a little from the six million tonnes in 2019-20.

Canada is well-positioned to again capture a good portion of that trade.

But it will continue to face competition from rapeseed grown in Ukraine and will likely meet increased competition from Australian canola this year.

Australia is enjoying much better weather following two years of drought.

Canola production is forecast to recover to 3.35 million tonnes, up from 2.33 million last year and 2.37 in 2018-19. However it would still be smaller than the crops grown in 2017-18 and 2016-18.

Australian wheat is forecast to recover to 26.67 million tonnes from 15.17 million last year.

Russia is expected to be a major competitor in the wheat market again with most forecasts now calling for a crop a little larger than last year’s. That would make it the second largest on record.

The winter and early spring were dry in areas close to the Black Sea but that’s expected to be more than offset by good crops further northeast in the Volga River region.

The wheat increase in Russia would offset a production decrease in Ukraine.

In India, the summer monsoon has covered all the country earlier than usual, lifting hopes for good production this year.

So, other than the modest problems in Europe, global crop production is so far looking comfortable.

And the market is further depressed by general financial anxiety about the increasing global pace of COVID-19 infections, particularly the situation in the United States where there are worries states might have to slow or reverse steps taken to re-open the economy.

About the author

Markets at a glance

explore

Stories from our other publications