Tags: Crop Damage From Weather Growing as Cost of Grains Advances

Crop Damage From Weather Growing as Cost of Grains Advances

Tuesday, 10 May 2011 10:41 AM EDT

Less than a year after the worst drought in a generation destroyed one-third of Russia’s wheat crop and sent global food prices surging, more bad weather is damaging fields from North America to Europe to Asia.

Corn planting in the U.S., the world’s largest grower, is advancing at half of last year’s pace because of excess rain, government data show.

The Canadian Wheat Board said fields are so muddy that only 3 percent of grain has been sown, compared with 40 percent normally. At the same time, drought left the Kansas wheat crop in the worst shape since 1996, and dry spells are threatening crops in France, Western Australia and China.

While the growing season is still early in the Northern Hemisphere, corn futures as much as doubled in the past year as U.S. stockpiles headed for a 15-year low, and wheat is up 58 percent from a year earlier. The United Nations says global food costs advanced in April for the ninth time in 10 months, and higher commodity expenses led food makers including General Mills Inc. and McDonald’s Corp. to boost prices to consumers.

“We needed everything to go perfectly, but there’s really a lot of potential for problems, based on these weather issues,” said Sterling Liddell, a vice president for food and agribusiness research at Rabo AgriFinance in St. Louis, who expects corn to reach a record $8 a bushel if conditions worsen. “It could be a very explosive situation, because we’re already so tight.”

Reduced Inventory

In a report tomorrow, the U.S. Department of Agriculture probably will cut its forecast of global corn reserves before this year’s Northern Hemisphere harvest to 122.5 million metric tons, the lowest in four years, according to a Bloomberg News survey of 14 analysts. The U.S. is the world’s biggest exporter of corn, soybeans, wheat and cotton.

While the survey showed corn inventories probably will rebound to 125.4 million tons next year, as higher prices spur farmers to plant more, some analysts expected further declines before the 2012 harvest.

Weather, especially in the U.S., may be the “swing factor” for rebuilding global grain inventories, said Dan Manternach, a wheat economist with Doane Advisory Services, an agricultural research company in St. Louis.

“Things are so tight, if Mother Nature so much as hiccups on adverse weather, it can be unusually bullish for commodities,” Manternach said.

Time to Recover

There’s still time for crops to recover. About 40 percent of the U.S. corn crop was planted as of May 8, compared with 13 percent a week earlier, USDA data show. In Iowa, the biggest producer, planting was 69 percent complete, up from 8 percent.

Tyson Foods Inc. (TSN), the largest U.S. meat processor, said it is too soon to start hedging its corn-feed supply for livestock, before this year’s crop is harvested. “It’s pretty dangerous to start buying corn for the fall before you’ve planted the crop,” Chief Executive Officer Donnie Smith said yesterday in a conference call with reporters. “There’s way too many things that could happen.”

Rising profits also are encouraging farmers to plant more. The International Grains Council estimates that global wheat production may climb 3.4 percent this year to 672 million tons, while Memphis, Tennessee-based researcher Informa Economics Inc. forecasts production at 679 million.

Last year, the worst drought in 50 years spurred Russia, once the world’s second-biggest shipper, to ban grain exports through at least July 1, sending wheat futures on the Chicago Board of Trade to $9.1675 a bushel on Feb. 14, the highest since August 2008.

Spring-wheat planting may decline from last year, Russia’s Grain Union said.

Export Ban

If the Russian government retains the export ban to protect domestic supply, farmers may sow less wheat and plant sugar beets, oilseeds including sunflower, and buckwheat, SovEcon managing director Andrei Sizov Jr. said May 4 in an interview in New York.

Dry weather in France and Germany and the U.K.’s hottest April in at least 352 years are threatening crops across the European Union, producer of one-fifth of the world’s wheat.

“We’re definitely going to be producing less grain than we can consume,” said Andrew Dewing, the owner of Dewing Grain in Aylsham, England. “That doesn’t bode well for next year.”

Parts of Western Australia have had the lowest rainfall on record for the past 16 months, according to the country’s Bureau of Meteorology. The government in Manitoba, Canada, has declared a state of emergency because of floods. Wheat output in China, the world’s biggest consumer, may decline for a second straight year because of dry conditions, Tommy Xiao, an analyst at Shanghai JC. Intelligence Co., said on May 5.

China Drought

Drought conditions may persist in wheat-growing areas from China, the world’s largest grower and consumer, to the U.S. and Western Europe, hurting crops and lifting prices, British Weather Services said on May 6.

Global wheat inventories may drop to 182.1 million tons by June 1, down from last month’s USDA estimate and 8 percent lower than a year earlier, according to last week’s Bloomberg survey. Inventories at the end of next year may be little changed at 182.27 million, analysts said.

The U.S. winter-wheat harvest, which begins next month, probably will total 1.387 billion bushels, the least in five years, according to the survey.

The crop in Kansas, the biggest U.S. grower of winter varieties, may shrink by 29 percent from last year because of drought, according to a survey of 55 analysts conducted last week by the Wheat Quality Council and based on field samples. The dry spell in Texas, the No. 2 grower of winter wheat last year, means the state may produce two-thirds less than normal, said Mark Welch, an extension economist at Texas A&M University in College Station.

Like Russia

“Texas and Oklahoma are very comparable to what happened to the Black Sea region” of Russia last year, Doane’s Manternach said. “It’s too late for rain to help those crops.”

Central Kansas had less than 25 percent of normal rainfall in the past 30 days, while parts of Oklahoma and Texas had less than 5 percent, said Drew Lerner, the president of World Weather Inc., an Overland Park, Kansas-based forecaster.

In Minnesota and North Dakota, the biggest spring-wheat grower, farmers face planting delays after receiving twice the normal amount of precipitation in the past month, Lerner said. Parts of the Ohio River Valley and the Mississippi River Delta have had up to four times the normal amount of moisture, he said.

“The window for optimal yields in the lower Midwest is closing, or it will soon,” Lerner said. “That doesn’t mean they can’t have a good crop, but their potential for yields is kind of escaping.”

Food Prices

Corn futures for July delivery rose 0.8 percent today to $7.13 a bushel in Chicago, leaving prices up 91 percent in the past year, while wheat futures for July delivery advanced 2 percent to $8.065.

The grain rally is boosting costs for meat processors and grocery stores that are passing the expenses along to consumers.

Tyson Foods posted fiscal second-quarter profit yesterday that missed analysts’ estimates as higher spending on feed eroded gains in beef and chicken prices. Grain costs in fiscal 2011 will rise almost $500 million from a year earlier, the Springdale, Arkansas-based company said.

Oak Brook, Illinois-based McDonald’s boosted menu prices in the U.S. by 1 percent in March, Chief Financial Officer Peter Bensen said on an April 21 conference call. General Mills, based in Minneapolis, said in March it would raise prices amid “volatile costs for food ingredients.” Denny’s Corp., the Spartanburg, South Carolina-based restaurant company, said May 3 that it plans to raise prices about 1 percent because of more expensive commodities.

“This year, more than most years that we’ve experienced, it’s more critical that we don’t have problems,” said Liddell, of Rabo AgriFinance, a unit of Utrecht, Netherlands-based Rabobank Group.

“All of the crops are extraordinarily tight, so this needed to be the year where we didn’t have any problems in order to rebuild stocks.”

© Copyright 2024 Bloomberg News. All rights reserved.

Less than a year after the worst drought in a generation destroyed one-third of Russia s wheat crop and sent global food prices surging, more bad weather is damaging fields from North America to Europe to Asia. Corn planting in the U.S., the world s largest grower, is...
Crop Damage From Weather Growing as Cost of Grains Advances
Tuesday, 10 May 2011 10:41 AM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.
Get Newsmax Text Alerts

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved
© Newsmax Media, Inc.
All Rights Reserved