Recent weather anomalies around the world have been reminiscent of 2007-08, a period when trouble seemed to impact nearly all major agricultural areas in the world at one time or another. Production cuts occurred in many areas, resulting in a bullish bias in commodity futures prices.
Dryness this late spring has affected portions of Canada’s Prairies, the U.S. northern Plains, Midwest, southwestern Plains and desert southwest, parts of southern Russia, Ukraine, Kazakhstan, northern China and Australia. Too much moisture has affected parts of central and northern Russia, delaying spring planting of wheat and sunseed and parts of India may trend drier into late June. And we must not forget Argentina’s drought earlier this year and dryness in Safrinha corn country of Brazil in recent weeks. So, is the start of another bullish run in the marketplace?
Outside of winter wheat there are not many bullish technical price charts out there. It is a different world than 10 to 11 years ago, although we are approaching a solar minimum just like back then. Some analysts have suggested that solar minimums tend to bring volatility to human behavior, and trading in the financial and commodity markets have tended to be a little more extreme at such times as this. Weather is expected to play a role in the market behavior as usual, but already in recent weeks there has been some market contribution from mother nation.
Drought that began in Canada’s Prairies in 2017 refused to go away during the winter. Spring weather conditions became quite extreme for a while with the Prairies soil moisture reaching an extreme in dryness during the third week in May. Since that time there has been a period of unsettled weather that brought significant relief to key crop areas across the Prairies. Significant rain reported in early June saturated the topsoil in eastern Saskatchewan and parts of Manitoba. Parts of western and northern Alberta were just as wet as they were earlier this year. The significant rain that came to the Prairies evolved as the region transitioned out of the winter weather pattern and into a summer pattern. This transition is still underway, but the greatest change in soil moisture has occurred, and a drift back toward drier conditions may soon get underway.
Some central, west-central, southwestern and south-central areas in Saskatchewan and a few in east-central and interior southern Alberta never received a good soaking of rain. The outlook is now beginning to look a little drier as a new weather pattern evolves, and this one may keep the southern parts of the Prairies running dry for a while longer. That could easily return some moisture stress and resume pressure on this year’s grain, oilseed and pulse crop production, despite the recent relief from extremely dry conditions.
In the meantime, parts of the U.S. Midwest trended quite dry in the first week of June with parts of eastern Iowa, Missouri, Illinois, Indiana and Kansas experiencing some significant declining soil moisture. Crop stress was observed in many fields. Part of the problem with dryness in early June came from May’s record to near record warmth across the Midwest that kept evaporation rates running high even though rain was falling periodically.
Similar to Canada’s dryness relief, the driest areas from eastern Iowa to Indiana received significant rainfall June 8-11, bolstering soil moisture with 2.5 to nearly 4 inches of rain with local totals approaching 7 inches. A huge bout of relief resulted in these driest areas. The relief from dryness was extremely important from eastern Iowa to Indiana since these areas were not expected to suffer from extreme dryness in 2018. The early season trend was raising some significant concern about a more widespread dryness problem this year. Now that relief has occurred across these previously driest areas, the summer outlook calling for the most significant dryness to be in the western Corn Belt, is back on track.
Already, Missouri, Kansas and the Delta are quite dry and not likely to get large amounts of rain anytime soon. The southwestern Corn Belt always has been the area most likely to deal with dryness this year with some expansion northward in July and August. The changes occurring in rainfall and soil moisture recently raised the potential for the U.S. longer range outlook to verify. That outlook not only has the western Corn Belt trending dry, but also allows bouts of cool air into the eastern Midwest periodically to help conserve soil moisture as rainfall trends a little lighter than usual.
North America is not the only area of dryness as noted above. Australia has had a tough time getting rain in the far west, but there has been some important rainfall recently that is supporting the planting of wheat, barley and canola. Western Australia is not out of harm’s way yet. Additional moisture is needed to get this year’s crops planted, emerged and established. Southeastern Australia soil moisture and crop conditions are best.
Australia’s greatest drought-stricken region remains in Queensland and northern New South Wales, where very little rain has fallen in months and little fieldwork and poor winter crop stands are expected without significant changes soon. The drought will live on for a while.
Ukraine, Russia’s southern region and Kazakhstan have been dealing with dryness all spring, and it looks like the trend will continue into the heart of summer for at least a part of the region. Some of the recent dryness has expanded to the northwest into Belarus and Poland. Portions of eastern Romania and eastern Bulgaria also have some significant dryness lingering.
Weather conditions in Eastern Europe and western parts of Russia, Belarus and western Ukraine are expected to be well mixed in the balance of June. But, well-mixed may not be good enough. A short-term bout of relief — like that noted in Canada and the U.S. Midwest, is expected in some of the drier biased areas, but a full recovery from months of below-average precipitation is not likely. Drier and warmer conditions expected again late in June and early in July likely will restore some dryness issues and further stress crops raising some production issues in at least a few areas.
In the meantime, northern and central Russia and parts of Western Europe (France in particular) have been wet this season and that has slowed farming activity. The biggest disruption to fieldwork has occurred in Russia’s New Lands where wheat and sunseed planting has been well behind average and that already has prompted the Russians into suggesting a 10% fall in production is possible this year. That number could grow if weather adversities continue.
China is another area that has experienced some dryness this late spring, and it was expected to continue in a part of the nation into early summer. The Yellow River Basin, North China Plain and Northeast Provinces have been at the center of dryness. These areas represent a huge part of the China grain and oilseed production. Rice and cotton also are produced in these areas and would all be threatened if the pattern fails to change.
China’s Northeast Provinces were experiencing the first of several days of rain at the time of this writing and by June 21 soil conditions were expected to be much improved. That will translate into better corn and soybean planting and establishment. The Yellow River Basin, however, may continue dry biased for a while.
The bottom line is that many areas are still dealing with some dryness this year, and a close watch in the trends is warranted over the next few weeks. Weather likely will lead the marketplace if serious production issues are going to evolve. The best guess is that 2018 will not follow very closely to that of 2007-08, but the parallel is interesting.