It is spring, crops mostly are in the ground and it is a time of optimism, so I’m reluctant to talk about troubling long-term seasonal weather outlooks, but they exist, regardless of whether I talk about them.
At the bottom of the column I’ll also touch on oil sector developments that might lead to lower crude oil prices this summer.
Generally, weather models predict a growing season that is warmer and drier than normal through much of central North America.
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That is not a guarantee of lower yields, but it is worrisome.
And one statistical point focuses that worry.
The U.S. Department of Agriculture’s weekly Crop Progress report issued each Monday gives data such as the per cent of a crop that is considered excellent, good, fair, poor and very poor.
The first rating of the American national spring wheat crop May 27 was 45 per cent good to excellent, far lower than last year’s 74 per cent and the 10 year average that is in the mid 60s.
North Dakota, the largest of the spring wheat producing states, had the worst conditions with only 37 per cent good to excellent and 26 per cent poor to very poor.
The worst year for initial spring wheat condition in the last 40 years was the disastrous 1988 crop. This year is tied with 2021, which was the second worst rating in 40 years. As many will remember, 2021 produced the smallest crops in many years.
Even in a dry year, rain can arrive at an opportune time to save yields.
For example, a system May 15-16 delivered significant rain south of the Trans-Canada Highway and in western North Dakota.
This might improve spring crop ratings in the USDA’s report this week.
But more generally, since April 1, areas north of the Trans-Canada in Saskatchewan and Manitoba have received below normal rain, and a large area north of the Yellowhead Highway in those provinces has received only 40 per cent or less of normal rainfall.
A large part of northwestern Alberta and the Peace region are also exceptionally dry.
Iowa, the biggest corn producer in the United States, has also been dry in the past month, but rain is in the forecast for this week. But generally, models suggest June could be dry in the western U.S. Midwest.
Is the market taking notice?
The heavily traded Chicago soft wheat futures contract weakened into the end of the month, reflecting news that Russia’s crop might not be as bad as expected earlier this spring and word from India that spring heat did not stand in the way of it producing a record large wheat crop.
Concerns about a heat wave in the North China Plain also faded from the headlines.
However, the Minneapolis hard spring wheat contract showed a little life.
It hit a 2025 low on May 16 when the July contract closed at US$5.74 a bushel, but by the close May 30 it had climbed to close at $6.25 ½.
The models that show a hot, dry summer for much of the grain and oilseed growing regions in Canada and the U.S. this year are not influenced by the El Nino Southern Oscillation, which swings from El Nino or La Nina condition in the Pacific Ocean.
We are in a neutral phase of the oscillation, and that is expected to continue through the Northern Hemisphere summer.
Let’s hope that these modelled forecasts are wrong or at least change soon. At the very least, hopefully the rain that we do get falls at just the right time.
Turning to the global oil sector, a few weeks back I noted that OPEC+ decided to end its production curtailment program and ratchet up production quicker than planned.
Production rose by 410,000 barrels per day this spring.
Speculation last week was OPEC would raise production again this summer.
Reuters said OPEC members wanted to win back market share they lost to other producers. Twenty years ago they had half the market. Now it is closer to 25 percent.
This raised speculation that some members want to press prices lower to a point that is uncompetitive for American shale oil producers.
This happened about 10 years ago, prompting an oil price war.
Brent crude was priced at more than $100 a barrel in 2012-13 and early 2014 but then plunged in the fall of 2014, eventually bottoming at less than $50 by the end of 2015.
In those years, U.S. production grew rapidly thanks to new technology. Global supply increased, but Saudi Arabia was unwilling to cut its production, hoping it could drive U.S. drillers into bankruptcy.
It hurt American producers, but finally OPEC was forced to retreat.
Middle East oil has a low break-even cost, but governments there need the revenue to maintain their budgets.
