Winter weather in the US adds worries for cereals

Agricultural , Commodities , Corn , Wheat May 05, 2013 No Comments

CerealsThe United States Department of Agriculture’s Crop Progress report, published last week, showed conditions deteriorated in Kansas, Oklahoma and Texas following freezing temperatures in April.

Winter extended unusually in the United States, there were more than 30 cm of snow in western Iowa, a major grain states in the country. When there is no snow, it’s rain preventing farmers from sowing. Having sowed only 5% of corn in may had not happened in the United States for nearly thirty years.

“We’ve been concerned by some extraordinarily cold morning temperatures,” said Todd Hultman, a grains analyst at DTN. “The USDA report just added confirmation that people are expecting damage from those conditions.”

Sowing of spring wheat have also been delayed, compounding concerns about winter wheat planted on previously too dry soils. This doesn’t sound good but no conclusion can be yet drawn about future harvests because everything is still reversible. What is certain is that since March, the weather is driving grain markets.

In Kansas, the winter wheat crop was 53 percent jointed, behind 100 percent a year ago and 78 percent average. The wheat crop was 1 percent headed, well behind 70 percent a year ago, and 19 percent average. The condition of the crop was rated as 18 percent very poor, 21 percent poor, 34 percent fair, 25 percent good, and 2 percent excellent.
Corn planting was 7 percent complete, well behind 53 percent last year and 35 percent average. Corn emerged was 1 percent complete, behind 23 percent last year and 10 percent average.

Analysts explain that we entered a “weather market” where uncertainty will reign almost until September, until harvests in northern hemisphere major exporting countries, and the markets will be nervous, causing strong fluctuations up or down at any news. This behavior could be considered excessive, since the United States forecast the largest corn crop in history. But the largest corn crop in history had already been forecast last year, and the summer drought in the Midwest shattered that hope.

Although the countries around the Black Sea are supposed to compensate for any shortage of U.S. wheat, they are not immune to a new drought: it’s already 28 degrees in Ukraine and May is expected to be very hot in Russia, and 3 years ago a third of the Russian harvest had been destroyed by heat between May and June.

Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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