By the time you read this, the biggest news in grain markets will be the Aug. 11 United States Department of Agriculture crop forecasts.
But this week our deadline is Aug. 4 so we won’t be able to get to the USDA data analysis until the next issue.
So in the meantime, let’s note the rising concern in the U.S. winter wheat belt about dry soil.
The crop there is already harvested and yields were disappointing. But markets have begun to react to the continuing drought and farmers’ worries about seeding the crop that will be harvested in 2007.
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Normally seeding does not begin until September and only fertilizer application and other fieldwork are considerations for August.
But the future looks grim based on current soil moisture conditions in Kansas, the biggest winter wheat producer.
The state says that 80 percent of fields are short to very short of surface and subsurface moisture. It is a similar story in Nebraska and conditions are even worse in Oklahoma.
The U.S. Weather Service’s Climate Prediction Centre forecasts normal precipitation for the area this fall. Some relief may arrive during the winter for northern Texas and Oklahoma, judging by the centre’s forecast for a better than normal probability of precipitation for January to March.
It seems early to be speculating about a crop that isn’t seeded yet and won’t be harvested until next year. But the world’s wheat supply is tight.
The International Grains Council’s year-end stocks forecast for 2006-07 is 118 million tonnes, the lowest since 1996-97.
With consumption forecast at 611 million tonnes, that marks a stocks-to-use ratio of 19.3 percent, considered exceptionally low.
So any threat to wheat crops in coming months will be closely watched for the potential to support prices.
Given that the United States and Europe are well into the spring wheat harvest and Canada is about to start cutting, crop size estimates in those regions are firming.
Australia’s harvest is some months off so it is more of a wild card. Forecasters there recently cut their outlooks by about two million tonnes.
The growing season has been dry to this point and Australia’s national weather service forecasts a 50-50 chance of key wheat growing areas getting historical median rain totals in August-October.
In Argentina, where 86 percent of the expected wheat acreage had been seeded as of last week, recent rain has helped make up for what had been a dry preplanting period.
