THE WATCHLIST:
Coarse language
Coarse grain markets have an eye on multiple weather concerns.
AUSTRALIA
Australia is in the midst of a couple of wet weeks. The rain has prompted us to take all Australian regions off The Watchlist. We have, though, marked down our crop estimates for South Australia’s east and adjacent regions in NSW and Victoria. The rain will help crops in those regions but the start has likely been too harsh to expect normal yields.
WORLD
WHEAT
Wheat has very few crop issues for now. The last of Australia’s wheat regions has been taken off the watchlist. Some of those have been translated into losses in our SnD. Some of Argentina’s winter crop regions remain a ‘watch’ but are not yet close to cutting yields. These worries will have little impact on global prices.
COARSE GRAIN
The coarse grain market continues to have the most weather worries. The watches – in the US, Ukraine, Russia and Europe – cover a material chunk of world production. These issues, though, are no longer new, so they are already ‘priced’. Nonetheless, they likely help temper the most optimistic forecasts, particularly for US corn yields.
OILSEEDS
Oilseed issues remain similar to last week. Canola, soybean and sunflower seed crops are among them. The scale, relative to global production, is modest. The issues are not urgent for now. Nor are the issues new. So, the price impact is modest, likely offering a little support.
AUSTRALIA
Most of Australia’s winter crop regions saw rain over the past week. Weather forecasters expect more rain in the early part of this week. The rainfall is sufficient for us to all but wipe The Watchlist for Australia. Queensland crop regions are ‘unwatched’ because the rainfall ends the dry period since early planting rains. The southern areas, however, are moved to ‘losses’. These adjacent areas of South Australia and Victoria have had little moisture since the planting window began. That poor start means production will very likely be below potential.
WORLD
Other Southern Winter Crops
The ‘watch’ region in Argentina was largely dry over the past week. Forecasters expect the same in the week ahead. So this area remains a ‘watch’. Crop forecasts remain unlikely to change this early in the season.
Brazil‘s winter crops will likely continue to have abundant moisture, suggesting upside potential for crop forecasts.
Northern Summer Crops
United States’ summer crop regions have two issues, one existing and one new. The new issue is that nighttime temperatures are on the high side in some of the Corn Belt. Those high lows can reduce both the fill period, and the amount of filling during that time, for corn crops. An extended period can result in lower kernel weights and thus yield. The existing issue was a drier trend in some lower Midwest and Delta areas. This issue has, or will, shrink this week, but a small portion remains. Confusingly, the two issues overlap, and their interaction is not simple. With luck, the weather will resolve the issue for the better, and absolve the market of the need to debate such minutiae!
Several summer crop regions of Russia and Ukraine remain on The Watchlist. But the total area has been trimmed because of rain (actual and forecast). Forecasters expect a little rain this week in the remaining region. Being summer, however, likely limits soil moisture gains. This issue is not yet urgent, but may become so by next week if temperatures surprise on the high side.
Europe’s west continues to struggle with low soil moisture. A little rain last week, and cooler temperatures this week, provide some respite. Forecasters, however, expect little rain, so the moisture shortage remains. So, the yield drop likely continues.
Some of Canada’s Prairies are, grudgingly, on The Watchlist. Soil moisture has been very patchy this season. Most areas have had useful soil moisture for periods. However, drier periods along the way have also been material. That pattern makes for a confusing mosaic. Which of the alternating moist and dry periods has had the most impact? These crops are robust to limited dry periods, so long as they eventually receive moisture. So, intermittent moisture does not, categorically, imply significant yield loss. That robustness implies a flexibility that means any ‘average’ of moist and dry periods grossly oversimplifies the issue. Thus, our hurdle for Watchlisting is high-ish. The Canada Prairies’ unusual season is deeply in our grey area. Now, though, the anecdotes we use to ‘ground-truth’ suggest the low moisture periods have had an impact. So we have, belatedly, added some Prairie regions to The Watchlist. The scale of the issue is modest for oilseeds, but significant within the confines of canola.
Summer crops in China, for now, have no emerging or actual issues.
Northern Winter Crops
Growers are well into harvesting northern winter crops. Weather forecasters are not expecting any widespread, sustained interruptions. Thus, the production flowing to the market will grow.
Southern Summer Crops
Brazil’s second-crop harvesting should continue without interruption. Harvesting is running behind but not because of current weather issues.
