THE WATCHLIST:
Risk summit, month two
July done, we now peer into August, the second month of peak crop risk.
AUSTRALIA
Australia’s winter crop prospects are improving. Rain over the past week, and further rain this week, drive that change. Yields in a chunk of the south are likely to be below normal. But, broader prospects might easily make up, or even exceed, those losses. The season still has long way to go, so more hiccups are possible. Nonetheless, there is now no crop handbrake on prices and basis following their normal seasonal path.
WORLD
WHEAT
Wheat continues to have few crop worries for now. Parts of Argentina and Canada remain a ‘watch’. The watches cover a small share of production, so there is little impact on global prices.
COARSE GRAIN
The coarse grain market continues to have the most weather worries. But, the area covered shrinks a little this week. Watches cover parts of the US, Ukraine, Russia and Europe. These areas include a material chunk of world production. The price impact is limited for now. Partly because, for most of these areas, crops are not yet being downgraded. And partly, because coarse grain supply is neutral, and only large crop cuts would change that. Moreover, the market’s focus is on guessing just how large Brazil and US corn crops will be. That debate involves larger quantities than the forecast downgrades for now. But, that is a ‘live’ issue this time of year.
OILSEEDS
Oilseed issues remain similar to last week. Rolling into August, weather issues become more pressing, particularly for US soybeans. The weather horizon extends well into the month, so analysts become more likely to change their crop forecasts. In that context, weather worries are more likely to impact prices. For now, the scale of the issues, and the neutral oilseed supply context, mean the impact is most likely modest. We are, though, at a time of year when crop forecasts can change quickly.
AUSTRALIA
Welcome rain fell in most Australian winter crop regions in the past week. Forecasters and models expect more rain over the next week or so. The south and south-east likely get lighter rain, but that is not cause for concern for now. The West is favoured by the rain, likely bolstering confidence in existing crop estimates.
WORLD
Other Southern Winter Crops
The ‘watch’ region in Argentina was, as forecast, largely dry over the past week. Forecasters expect a little rain in the week ahead. The amounts though do not justify taking this area off ‘watch’. August is still too early for the issue to prompt lower crop forecasts.
Brazil‘s winter crops will likely see more rain this week. Abundant early-season moisture suggests potential upside for crop forecasts.
Northern Summer Crops
United States’ summer crop worries diminished over the past week. Ahead, the focus turns from corn’s July to soybeans’ August. A couple of issues remain. One is, how well have the crops coped with abundant rain? Anecdotes suggest some growers have had pollination issues. Scaling anecdotes up to crop-wide impact is a hazardous exercise, often prone to confirmation bias. So we will not. The drying in some areas of the lower Midwest and Delta is a persistent issue. Forecasters expect this ‘watch’ area to have high temperatures and modest rain over the next week or so. Top soil moisture is thus likely to drop. Modest subsoil moisture means the issue is not yet urgent. An earlier corn issue, high nighttime temperatures, dissipated last week. Lows were occasionally too high in some places. But these periods were probably neither persistent nor widespread enough to have a crop-scale impact. Overall, US summer crops have had abundant moisture. For most crops, that is a plus. So, the bias is for crop forecasts to rise.
The ‘watch’ region in Russia and Ukraine is persisting. Forecasters expect little rain and high temperatures this week for the watch region. Without rain soon, the issue will become more urgent. And, lower crop forecasts become more likely.
Crops in Europe’s west will continue to struggle. Weather forecasters expect little rain for another week or so. And, given forecast temperatures, crops will get little chance to use that scant moisture. So, yields likely continue falling.
The same areas of Canada’s Prairies remain on The Watchlist. Soil moisture is modest, as it has often been, in the ‘watch’region this season. Forecasters expect a little rain in the region, but not enough to raise soil moisture.
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.
