Posted on May, 13, 2024 at 09:50 am
Bad weather and war are threatening to keep the world’s wheat supplies under strain and reviving the spectre of rising food costs.
From soggy fields in western Europe to parched soil in Australia, and Moscow’s invasion holding back Ukrainian supplies, farmers face setbacks. That means global stockpiles will remain the smallest in almost a decade, according to analysts.
Bumper Black Sea harvests have long kept a lid on prices, and wheat is trading at half its record set in 2022, but supply concerns are mounting again. Futures have rebounded to hit the highest since August and funds are trimming bearish bets that they’ve held for almost two years.
“Demand has increased, stocks remain tight globally and new crop issues are escalating,” said James Bolesworth, managing director at CRM AgriCommodities.
With Northern Hemisphere harvests approaching, the next few weeks remain critical for crop development, so there’s still time for things to improve or worsen. Here’s a round-up of conditions in major growers:
Black Sea dryness
Top exporter Russia risks missing out on crucial moisture, with weeks of heat and not enough rain in the country’s south prompting analysts to cut harvest estimates.
Russia should still reap a big crop, but its dominance means that any jolts to local prices feed through to other markets, and the country’s wheat has been getting more expensive lately.
War in Ukraine
Dryness has also hampered swaths of Ukraine’s wheat in recent weeks, but war is fuelling other problems. Attacks on agriculture infrastructure threaten exports and the workforce has been depleted as men serve in the army.
Grain output in the upcoming season could drop 6pc from a year earlier, with farmers expected to divert grain acres to more profitable crops like rapeseed.
Wet Western Europe
A soggy spring hurt crop development across north-west Europe. Winter crop quality, which determines whether supplies are used for food or for animal feed, could also suffer.
In France, the share of wheat and barley in top conditions lags far behind last year’s level. Rain has also slowed spring plantings in the UK, Germany and France.
Parched Australia
A dry, hot summer in parts of Australia has dried up soil just as farmers plant the crop. While recent rain provided a bit of relief in some areas of the key state of Western Australia, growers remain cautious.
Dry US
Drought has gripped a bigger share of US winter wheat fields since early April, and remains a concern for spring plantings, even as recent forecasts indicate showers.
Still, more US winter wheat is in the top condition than usual for this time of year and spring plantings remain ahead of the five-year average pace.
Crop concerns are showing up in prices, with money managers now the least bearish since July. But things could change before the first Northern Hemisphere harvests start in roughly four weeks.
There is “a lot of weather to trade yet, the crop is far from being complete and if rains show up they will have value,” said Matt Ammermann, a commodity risk manager at StoneX. “It remains a wait-and-see type of game.”
Source: Irish Independent