The UK analysts noted the unusually dry weather in the key Corn Belt growing area of the US. While it is early days yet, lower-than-expected crop ratings and expanding dryness are raising doubts over US Department of Agriculture (USDA) forecasts for US corn yield and production.
“Comparisons are increasingly being made with 2012 when US corn production fell by nearly 40Mt year on year, despite an extra 5M acres in sowings, as drought depressed the yield to a 17-year low.”
This does not mean all is lost, said the CRM Agri team.
“There remains time for rain to refresh crops before the key month of July, which brings the heat- and drought-sensitive pollination period. Satellite data still indicate decent US crop potential.
"However, weather maps are, for now, not promising, foreseeing insignificant Corn Belt rains. Without rain, harvest hopes could be severely compromised."
Such dynamics have not been lost on the market, reads the report, which has sent corn prices sharply higher.
Impact from drought in Spain
Barley prices have staged a June recovery, powered by their own dynamics as well as the broader grain price buoyancy instilled by weather worries, notably in the US, according to the outlook.
“Dryness in the Europe, the top producing region, has only enhanced concerns of a tightening in world barley supplies in 2023/24. That Spain, a big feed buyer, is particularly affected has offered support to feed barley prices. In the UK, a big exporter to Spain, the feed barley discount to feed wheat has narrowed to £13/t, from £50/t (US$63.7/t) at the start of 2023.”
Wheat prospects
For UK feed wheat, drought damage to crops in feed importer Spain has helped to narrow the discount of the November-23 contract to Paris milling wheat for September-23 to €2/t, from levels above €13/t (US$14.19/t) two months ago, found the UK based grain and oilseed market experts.
“Still, prices of wheat at the other end of the quality spectrum have outperformed too. Minneapolis spring wheat, while losing some premium over Chicago, has regained premium over mid-protein hard red winter wheat.”
Dryness remains an issue for Russia’s spring wheat belt, albeit with rainfall forecast for this weekend, with a lack of rains reducing expectations for EU grains too.
“The EU Commission’s Mars bureau trimmed to 5.92t per hectare its forecast for the bloc’s soft wheat yield, more than reversing an upgrade made last month.”
Meanwhile, El Nino is overshadowing prospects for Australia, where the phenomenon tends to bring drought, Argentina’s wheat sowings have got off to a slow start, and Ukraine’s export outlook has been marred by worsening relations with Russia: “There may be cause to reassess the loosening in wheat exporters’ supplies in 2023/24 that the USDA foresees.”