CHICAGO, Illinois – Meteorologists offered ominous outlooks on the fate of American and Canadian crops as drought conditions creep farther into the heart of wheat country.
“It doesn’t look good. My overall impression now is the drought will persist and expand into at least this spring from the Canadian Prairies extending into the U.S. northern and central Plains,” said Mike Palmerino, a forecaster for weather company Meteorlogix.
The worrisome forecasts come on the heels of an extended period of scant rainfall and oppressive heat last year that slashed wheat yields in Canada and in the U.S. Great Plains hard red winter wheat region. The harsh weather devastated the crop in some key areas, including portions of Kansas, the top U.S. hard red winter wheat state.
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Crop experts and meteorologists cite warning signs that 2003 could be another bad year for producers.
Salomon Smith Barney meteorologists Jon Davis and Mark Russo, in a wheat weather bulletin last week, said there is no relief in sight from the dryness over the short term.
“The U.S. winter wheat crop is in its dormant stage of development, so it doesn’t need much moisture right now. But when it breaks from dormancy in roughly four to six weeks, it will need at least a drink or two to survive, much less thrive,” their bulletin said.
“There is a great deal of emphasis on precipitation increasing when, and just after, the crop comes out of dormancy,” Davis said. “The exact timing will depend on temperatures during February and March.”
Last year’s string of hot and dry days trimmed Canada’s wheat crop to 15.7 million tonnes, down roughly 25 percent from the previous year’s output, while the wheat in U.S. coffers fell to the lowest level in 30 years.
The sharp reduction boosted wheat prices early last fall to their highest level in five years, and U.S. farmers responded by planting the largest winter wheat acreage in half a decade.
Now that crop is struggling.
The U.S. government weather arm, the National Oceanic and Atmospheric Administration, said in early December that more than half the U.S. land west of the Mississippi River remained in a drought. Nearly all of the U.S. hard red wheat crop and most of the spring wheat is grown there and little rain or snow has fallen since that report was issued.
The El Nino weather phenomenon, an abnormal warming of waters in the Pacific Ocean that wreaks havoc on global weather patterns, continues to affect the United States. The national weather office said El Nino is expected to extend through April.
Grain market analysts are aware of the escalating problem but are also aware that the U.S. winter wheat crop could snap out of its winter doldrums.
“It definitely bears watching, and there are indications from our forecasters that the dryness will remain well into April, so there is that worry,” said Dan Cekander, analyst for Chicago-based trade house FIMAT Futures.
Lisa Wheeler, grain analyst for Cargill Investor Services, agreed that there is a problem developing but also said it was too early in the crop year to panic.
“We’re definitely watching it but the problem right now is that it’s not usually a rainy season in Kansas anyway,” she said. “There will be a much bigger impact if it stays like this into March and April.”
Astute market players are poised to dive into the long or bullish side of wheat futures if the drought persists.
However, they are cautious and aware that much of the drought worry has been factored into the wheat market by buying distant contracts and selling nearby ones.
The new-crop July contract, the one that would feel the most bullish heat should a drought persist, has rapidly gained ground on its nearby counterparts as players hedge against a possible drought this year.
“We are keeping an eye on it (drought). It’s something that has to be watched,” said Dale Gustafson, analyst for Salomon Smith Barney.
Gustafson also said that recent bitter cold weather in portions of the U.S. Midwest soft red winter wheat region may have harmed some of that crop.
Palmerino said the coldest readings were in central Illinois, central Indiana and Ohio, three key soft red wheat producing states.
“Those are pretty cold temperatures for soft winter wheat.”
But they did have a little snow cover and we won’t know the extent of damage until spring,” he said.
Davis and Russo said there was no threat of winterkill during the next few weeks.
“There will be a few weak to moderate Arctic air masses that will filter into the central U.S. during the next few weeks, but we do not expect any further major Arctic blasts into the early portion of February,” Davis said.
