Argentina’s crops got much-needed rain last week, giving weight to the perception that the La Nina system, that has tended to deliver dry weather to the region, is weakening.
Rain was also welcome in North Africa, which has experienced much drier than normal conditions this winter.
But weather relief in the two areas in the world with the biggest production problems was not enough to send crop prices down on major crop futures exchanges.
Chicago grain prices last week were firm on the weekly United States export tally that showed a welcome boost in American grain shipments and on data showing that grain production in war-torn Ukraine this year will likely be less than last year.
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The yield estimates for wheat and soybeans were neutral to bullish, but these were largely a sideshow when compared with corn.
The rain in Argentina halted the soybean and corn crop condition declines at least temporarily. Longer rain forecasts show drier conditions again in the Feb. 3-9 period.
Weather models for all of February show normal to below-normal moisture trends in agricultural areas of Argentina and southern Brazil and the models for March forecast a return to a strong drought threat.
But, as has been the trend through the past few months, the conditions for crops in Brazil’s central and northern growing areas are mostly good.
Combining starts earliest in northern Mato Grosso and early harvest reports there show better than expected yields of soybeans.
Taken all together, it seems like the weather developments through South America in the last week did not significantly change the production outlook for the continent.
On the other side of the world, the rain in North Africa was “a sorely needed reprieve, though the drought is far from over,” according to the U.S. Department of Agriculture weekly global weather update.
North African countries are often major buyers of Canadian durum so it is worthwhile to keep tabs on conditions there.
As noted earlier, grain markets were watching developments in Ukraine.
Ukraine’s corn and wheat production is set to fall for a second year in 2023, according to the Ukraine Grain Association, noting the stresses caused by Russia’s ongoing invasion.
The corn crop is not expected to exceed 18 million tonnes, down from 22 million to 23 million in 2022 and almost 42 million in the year before the invasion.
Wheat production is forecast at16 million tonnes, down from about 20 million in 2022 and 33 million in 2021.
The agreement with Russia that allows Ukraine grain to move under a protected corridor through the Black Sea and out into the Mediterranean has been surprisingly successful. But the quantity of exports will fall in the coming year if the crops are small and that seems likely given the increasing hostility of the war.
Also, the security of the shipping corridor could be lost.
Worries are increasing that Russia is preparing for a major offensive in the coming months and Ukraine is pressuring allies for more weapons to meet the aggression.
Many NATO countries, including Canada, agreed recently to provide advanced tanks to Ukraine.
Aside from the dominating issue of the war, there is another factor in question regarding Black Sea exports.
Russia’s official statistics put the 2022 wheat crop at a record smashing 104.4 million tonnes, but the USDA’s estimate of the crop is 91 million tonnes.
Mark Jekanowski, chair of the USDA’s World Agricultural Outlook Board, last week told a grain conference in Paris that his organization’s assessments of Russia crop season weather and knowledge of previous crops cause it to conclude that the Russian claim is “not feasible.”
Private forecaster Sovecon pegged the Russian wheat crop at100.6 million tonnes.
Russia has had booming wheat exports this crop year even with financial and banking restrictions placed on it by Western countries and high ship insurance rates.
Grain markets are also reacting to modestly improving global economic news that shows fears of recessions in major economies are lessening.
There is cautious optimism that higher interest rates and improving supply chains are reducing inflationary pressure.
That in turn reduces the need for central banks to keep lifting interest rates.
The Bank of Canada last week raised its rate by a modest 25 basis points and said it would likely not make further increases in coming months.
In the U.S., the economy slowed in the fourth quarter, lessening inflationary pressure, but it still grew a little, raising hopes that a major recession can be avoided.
And in Europe, a monthly gauge of consumer confidence rose to the highest level since February last year, also raising hopes that the zone could avoid a harmful recession.
