THE WATCHLIST:
Worries anew in ye Olde World
Summer crop worries worsen around the Black Sea.
AUSTRALIA
Australia’s winter crop prospects likely continue tracking at around pre-season levels. Forecast rain events over the next week or so will help most areas to some degree. The south remains vulnerable after a tough start. Other parts of Australia will likely make up for these issues. The weather is not going to divert prices and basis from their usual seasonal paths.
WORLD
WHEAT
Wheat continues to have few crop worries, aside from an ongoing watch on minor parts of Argentina.
COARSE GRAIN
The coarse grain market’s weather worries deepen this week. Some parts of Ukraine and Russia have now been dry for long enough that cuts to forecasts are becoming likely. And, in Europe, yields likely continue declining in the west and south-east. For now, however, the market’s focus is on larger upgrades to US and Brazil corn crops. That upgrade cycle will eventually come to an end. And the market’s attention can switch from the New World to the Old World. The worries about crops in Europe, Ukraine and Russia are material. And they might be enough prompt the market to trim their bearish SnD forecasts. That trimming may eventually provide some support to coarse grain prices.
OILSEEDS
Oilseed weather issues also took a turn for the worse. US issues remain modest in scale because they are confined to the Mississippi Delta. The large oilseed issues are in Ukraine and Russia. The same areas that have corn issues also have substantial sunflowerseed crops. These crops too are suffering, and lower crop forecasts are now more likely. Sunflowerseed is somewhat ‘off Broadway’ compared to soybeans. But globally, sunflowerseed accounts for about 10% of oil consumption and about 6% of meal consumption. Thus potential losses here can move the global supply ‘needle’, and so support prices. However, any likely tightening would not be large enough to make oilseed supply tight.
AUSTRALIA
Most Australian winter crop regions currently have enough soil moisture. The exceptions are in Queensland and the southern interior. Forecasters expect the Queensland exception to be remedied this week. Not so the southern interior. Forecasters expect only light rain in this area, adding to its tough start. Rain will be needed before temperatures rise.
WORLD
Other Southern Winter Crops
The ‘watch’ region in Argentina has evolved a little. Eastern Cordoba gained more soil moisture than expected, so it is unwatched. Coming onto The Watchlist is an area to the north, in Santiago Del Estero. The whole ‘watch’ area accounts for a modest production share .
Brazil‘s winter crops continue to have abundant moisture. Maybe too much, were it not for the drier week or so ahead.
Northern Summer Crops
The Watchlisted region in Russia and Ukraine is expanding a little. Forecasters again expect evaporation to outpace the rain in these regions. In our view, that means the low-to-no moisture period has been too long. Thus we have moved parts of the region to ‘alert’ because forecast downgrades are likely imminent.
United States’ summer crop worries will continue to be modest. The ‘watch’ region in the Delta and adjacent areas to the east continues. Forecasters expect a temperature and rain combination that would reduce soil moisture. The issue is no yet critical due to subsoil moisture. But, this trend needs to bend soon to avoid declining yields. This issue a minor for coarse grain but has a greater impact in oilseeds. And, in the context of a very good summer crop season in the US, they are most likely minor mitigations.
Crops in Europe’s west likely continue to lose yield. And the dry area in the east has expanded.
Forecasters expect good rains across most of Canada’s Prairies this week. Soil moisture will rise enough to benefit crops. And also halt yield declines in the Watchlisted areas. The rains are too late to reverse those yield declines. So, we now have those areas as ‘losses’. At global oilseed scale, the losses are modest.
Summer crops in China, for now, have no issues. Forecasters expect substantial rain to end a dry spell this week.
Northern Winter Crops
Growers are well into harvesting northern winter crops. Weather forecasters do not expect any material interruptions.
Southern Summer Crops
Brazil’s second-crop harvesting is now drawing to a close. As such, we are now out of season. We will resume monitoring again when planting starts later this year.
