THE WATCHLIST:
Kill or fill in Argentina
A critical week for Argentina’s crops hinges on unusually uncertain rain forecasts. Also, Brazil’s Mato Grosso is soggy, creating complications, but, for now, not changes to crop forecasts.
AUSTRALIA
Australia’s major summer crop regions have seen useful rain. More is likely this week. The rain will likely halt the decline in dryland crop yields.
WORLD
WHEAT
Northern winter wheat crops are starting to break dormancy and become more widespread over the coming weeks. Unusually high temperatures will likely accelerate this in the US HRW Wheat regions. The west of those regions is very dry, with little near-term prospect of rain. This dry area thus has a ‘watch’. The scale is likely a supportive factor for wheat prices.
COARSE GRAIN
Argentina’s dry regions remain a ‘watch’. As does a smaller region in far-south Brazil. Forecasters expect rain in both regions, but the extent and location is uncertain. For the wrong rain outcome, there is a greater chances of forecast downgrades. That path would provide further support for corn prices. Wet weather in Brazil’s Mato Grosso is a nascent issue for the market, so, for now, it is unlikely to trigger crop forecast changes.
OILSEEDS
The same dry regions in Argentina and Brazil are also concerns. The support for prices is greater because these areas are a bigger share of world oilseed production. The wet weather in Brazil’s Mato Grosso is creating issues, but it is unlikely to cause material cuts to soybean crop forecasts.
Southern Summer Crops
The watch on Argentina‘s summer crops has become more complex. Rain over the past week has been useful, so the moisture context is better than a week ago. The rainfall distribution was, though, uneven. Forecasters expect the rainfall spread to be similarly uneven over the next week or so. Combined with summer temperatures, the likely soil moisture outcome for any location is hard to predict. The uncertainty means we have not changed the ‘watch’, but whether those regions are nearer to ‘unwatch’ or ‘alert’ is more uncertain. Crop conditions have clearly declined in these regions, albeit from very high levels. The market will therefore be mindful because these regions’ production is material at a global scale. Healthy global supply, though, the situation is more likely to support prices than boost them.
Brazil’s summer crop regions now have an issue with too much moisture. Rainfall has been unusually heavy in Mato Grosso, much of Goias and into Minas Gerais. Forecasters expect more heavy rain in Mato Grosso this week. Soil sustained at these levels has a mix of implications. Overall, more rain is good for crops, supporting large corn and soybean crop forecasts. Too much rain though, generates several problems. The rain has slowed soybean harvesting and, reportedly, reduced the overall harvest quality. Neither is likely to see crop size decline, but they do crimp near-term export supply. For second-crop corn, planting delays raise a modest concern about crop development before Brazil’s dry season. Abundant moisture will speed crop development, but a late enough starting point risks shunting too much development into the dry season. In our view, now is too early to raise a ‘watch’ for this potential issue – but that might change quickly. By next week, if this week’s rainfall forecasts are realised, and forecasters expect still more rain, then the issue starts to morph from potential to actual. The ‘watch’ on the southern parts of Rio Grande do Sul remains for now. Rainfall last week did little to raise soil moisture. Forecasters again expect some useful rain here this week. Again, whether that rain will restore soil moisture is uncertain. Production at risk here is material, but not enough on its own to affect global prices.
Australia’s major summer crop regions have mostly received good rain in recent days. Forecasters expect some further rain over the next few days. Still-developing dryland crops will likely see yields stabilise at below average levels. The lost yield is one cause of higher feed prices in the local market. Australia’s dryland production, however, is not large enough to impact the global prices.
Northern Winter Crops
Northern winter crops are still mostly dormant, but that will end progressively from now. Extreme cold weather remains a risk, but forecasters do not expect extreme cold in any regions without snow cover in the week ahead.
US Hard Red Winter Wheat regions are an exception. Forecasters expect unseasonably warm temperatures for these regions over the next week or so. More of these crops are thus likely to break dormancy and resume (slow) development. Development means these crops need moisture. Problem is, these regions are very dry, just as they were through much of last autumn. We, therefore, have a ‘watch’ on the non-irrigated crops in this dry area. The issue is most likely a supportive factor for prices.
Southern Winter Crops
Monitoring will resume in the southern autumn.
Northern Summer Crops
We’ll resume monitoring in the northern spring.
