As harvesting gets under way in parts of the Northern Hemisphere, the industry’s attention is very much on the weather. The wheat market has moved in recent weeks from concern over drought to worries about the effects of heavy rainfall. Currency has also played a role, particularly because of the weakness of the euro and its fluctuations against the U.S. dollar.
"Dollar-denominated grain and oilseed prices mostly declined during the past month, largely attributable to the strength of the U.S. currency, especially against the euro," the International Grains Council (IGC) said at the very start of its Grain Market Report.
The most recent U.S. Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates report highlighted weather effects. The USDA lowered its estimate for E.U.-27 wheat production by 2.1 million tonnes, "reflecting crop damage from recent flooding and heavy rains in eastern Europe and April and May dryness in northwest France and the United Kingdom." The U.K. market rallied at the start of the month, only to lose the gains as it started to rain.
Britain’s HGCA reported that in Germany 43% more rainfall than average in May helped crops, although it reckoned that low temperatures and sunlight hours may limit yield potential.
It also said that dry weather continued for most of May across northern France, with rain in the south and southwest. Then evenly distributed rains at the end of May during the flowering period alleviated water stress but increased the risk of mycotoxins.
The USDA now has world wheat production for 2010-11 at 668.52 million tonnes, compared with its previous estimate of 672.18 million. Its figure for the 2009-10 crop is 680 million tonnes. Outbreaks of yellow rust meant a cut of 1.3 million tonnes in the estimated crop in Syria and a cut of 1 million tonnes in the USDA’s crop estimate for Turkey.
"Widespread outbreaks of yellow rust have sharply reduced yield prospects in key growing areas of both countries," the report said.
Russia production is lowered 500,000 tonnes as reports of higherthan-expected winter kill, particularly in the Volga Valley, reduce potential harvested area. Production is raised 500,000 tonnes for Ukraine as recent rains have improved yield prospects.
Parts of Eastern Europe have been hard hit, although the USDA’s attaché in Warsaw reckoned that most of the rain has managed to miss grain producing areas.
According to the attaché, floods have affected around 450,000 hectares of Polish arable land. However, the USDA’s attaché in Warsaw said that grains and oilseeds were largely undamaged. The worst affected sectors have been specialty crops, like hops and fruit.
Rainfall has not been welcome in Canada. "Exceptional spring rainfall will severely impact this year’s wheat, durum and barley production, leaving more than eight million acres unseeded, the Canadian Wheat Board announced in its preliminary crop forecast.
"The excess rain has washed away the hope of seeding for many farmers," said Bruce Burnett, CWB Director of Weather and Market Analysis.
The CWB projected the western Canadian seeded area for all wheat at 19.15 million acres (7.75 million hectares), the smallest area since 1971 and an 18% reduction from 2009-10.
Rain hasn’t been bad news everywhere. Eastern Australia had one of the best starts to its winter cropping season for several years, according to the Australian Bureau of Agricultural and Resource Economics (ABARE).
"Rainfall between March and May was the most widespread above average rainfall to be recorded over the eastern states since 2003," said Paul Morris, ABARE Deputy Executive Director.
"Despite the positive start to the season, crop plantings are expected to be down slightly due to lower wheat and barley prices," Morris said. "The area planted to wheat is forecast to fall by 2% to 13.5 million hectares. Wheat production in 2010-11 is forecast to increase to 22.1 million tonnes, a 2% increase from 2009-10, assuming average yields."