World wheat bounty at risk as dry spell spooks market
ALL DRIED OUT
There is no question that detrimental dry weather has been eating away at the projected bounty for this year's wheat harvest, but until northern hemisphere crops are harvested in the coming weeks it will be difficult to know how bad the damage is -- and whether it gets worse in the intervening weeks.
"The weather conditions in Russia have been damaging to the crop. The U.S. is the same way," said Jefferies Bache analyst Shawn McCambridge. "Production has been reduced. That has potentially tightened up the balance sheet. But we've priced in our expectations at this point.
"Now we need to prove up those expectations."
The quality of the crop in Kansas, the biggest U.S. producing state, suffered its worst one-week downgraded in 4-1/2 years last week.
Some U.S. Plains producers have cut poor fields for hay, while others have simply resigned themselves to lower projected yields as soil moisture levels have rapidly depleted in the absence of rain.
Russia is the top concern though, particularly after one of the worst droughts on record in 2010 cut Russia's crop to just 41.5 million metric tons, forcing Moscow to close its door on exports.
The U.S. Department of Agriculture expects it to export 20.5 million metric tons in the crop year to June 2012, about 14 percent of global trade, but analysts say that could fall by a third due to a combination of bad weather and still-low domestic stocks.
French agri-consultancy Agritel's bureau in Kiev on Friday projected a 2012 crop at 50 million metric tons and 53 million metric tons, down from 56.2 million last year and well below the USDA's 56 million.
"The main producing region recorded undeniable winter damage and is now facing a water shortage," said Agritel.
Ukraine's winter wheat crop was also expected to fall this season due to a severe drought that started in late summer last year, followed by a cold snap in January and February.
A senior weather forecaster on Monday pegged it at no more than 12 million metric tons, from 23 million in 2011 due to poor weather [ID:nL5E8GL337]. Agritel sees Ukraine's 2012 wheat crop at 13.5 million metric tons, down 40 percent on year.
In Kazakhstan, the wheat crop is pegged at about 18 million metric tons against 23 million in 2011, putting the whole Black Sea harvest this year at about 84 million metric tons, down 17 percent from 101 million metric tons last year but still far above the 68 million harvested in 2010, according to analysts.
NOT ALL IS LOST
Still, a turn to better weather could still have an impact, said Agritel analyst Gautier Le Molgat.