A dearth of rainfall has provoked questions over
expectations of a bumper US winter wheat harvest, and bumper sowings of the follow-on
soybean crop, besides raising concerns over Russian grains too.
Wheat prices revived on Tuesday, rebounding back over $6 a
bushel in Chicago, after an official report showed the condition of the crop in
Kansas, the top US wheat-growing state, falling significantly in the week to
Sunday thanks to a lack of moisture.
"Since precipitation continued to be scarce in many of the
principal wheat growing districts, the condition of the wheat crop continued to
decline," the US Department of Agriculture said, estimating the crop 52% in "good"
or "excellent" condition.
While a significant advance on the figure a year ago, when
dryness was of substantially greater concern, they were below the proportion of
60% a week before.
'Pretty alarming rate'
The data raised concerns over forecasts for the Kansas, and
US, winter wheat crop raised two weeks ago by a crop tour which estimated
that the state was in for its best yield for at least 30 years, but warned that
"timely rain is needed, especially in the south western and south-central
region of the state for the drought-stricken crop to improve".
Only last Thursday, the USDA estimated the domestic yield of
winter wheat, of which Kansas typically accounts for roughly one-quarter, at a "near-record
high" of 47.6 bushels per acre.
|Prices as of close on Tuesday|
Chicago soybeans: $14.13 a bushel, +1.9%
Kansas wheat: $6.27 ½ a bushel. +2.1%
Paris wheat: E199.50 a tonne, +2.1%
Chicago wheat: $6.08 ½ a bushel, +1.7%
London wheat: £149.30 a tonne, +1.1%
Prices for July contracts on US exchanges, and November in Europe
However, on Tuesday, Australia
& New Zealand Bank analyst Paul Deane said: "In Kansas, much of the state
received 0.5-to-1.0 inch below-normal rain during the week.
"Topsoil and subsoil moisture declined, and lack of
precipitation continues to be a concern among many producers."
'Starting to become
At Benson Quinn Commodities, Brian Henry said: "Recent hot
temperatures and minimal rainfall has the Kansas crop going backwards at a
pretty alarming rate."
And the US broker warned of the potential impact on sowings
of so-called "double crop" soybeans, planted after the winter wheat harvest, and
which had looked set for a large acreage given the early development of winter
wheat, of which harvest has begun in southern areas.
"Dry conditions in the southern plains are starting to
become of concern and could impact double crop bean acreage if rains do not
develop shortly," the broker said.
"Crops will need moisture in the extended outlook."
The data belied what was otherwise a strong set of data for
soybeans in the USDA's weekly Crop Progress report, showing sowings 46%
completed as of Sunday, compared with an average of 24%.
Some 16% of soybeans had emerged, three times the normal
'Fears about water
Concerns over dryness are also continuing to increase in the
former Soviet Union, where rainfall is an especially sensitive topic given the
drought two years ago which depleted harvests and forced export curbs.
Agritel noted "fears about water deficit" in the Volga,
Urals and Siberia regions of Russia, where temperatures 5 degrees Celsius above
average had stoked concerns for moisture, if encouraging crop development.
"Crop sprouting is good until now, but the lack of rain
could cause damage," Agritel said.
While rain is forecast for neighbouring Ukraine, where
dryness has also been an issue, "currently projections show that it will lose
intensity reaching the western edge of Russian border".
The USDA said in a report overnight that in Ukraine itself, "precipitation
improved in December–January, but spring has been increasingly dry in southern
and eastern Ukraine, which threatens to impact wheat yields even further".
On the markets, the data fostered a firm start to Tuesday
for futures prices, which notched up gains of more than 1% in Chicago and
Kansas, and 0.9% in Paris.
"Considering the dry conditions in Kansas and the Black Sea region,
the fund could lose interest in holding a large net short position in Chicago
futures," Mr Henry said.
"Considering the net short fund position in Chicago, the
tight old crop corn stocks and expected increase in [US] feed wheat usage in
the summer months, I am having a difficult time being short wheat at these