Analysis - Drought to Leave Mark on Global Grain Flows

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Analysis - Drought to Leave Mark on Global Grain Flows

By David Evans

Reuters

Monday 01 August 2005

Paris - Drought around the world threatens to leave its mark on global grain

trade flows this season, offering welcome new opportunities for some countries

expecting large harvests, analysts said on Friday.

Against a backdrop of declining world wheat stocks, bad weather has hit

world production this year and will raise trading volumes as countries increase

their import needs.

" Globally, you can't get away from the fact that stocks are declining, "

AgriNews analyst James Dunsterville said.

" We can still produce enough wheat around the world, but the market is

becoming more susceptible to regional losses. "

The International Grains Council (IGC) sees global wheat production in

2005/06 at 608 million tonnes, down from 624.5 million last season. World wheat

stocks are forecast to fall to 133 million tonnes, down five million from the

end of 2004/05.

Trade is seen rising to 109 million from 106 million tonnes.

From the plains in the US midwest to the wheat prairies of Australia, water

shortages have hit. Argentina is dry and India is mulling a wheat import-duty

cut to combat domestic shortages.

The US Department of Agriculture said severe drought in Illinois and

Missouri will hit the corn harvest there.

Spain Has Worst Drought on Record

In Europe, Spain and Portugal are suffering their worst drought on record

and in the major wheat importing countries of north Africa, much lower harvests

are expected.

Drought in Morocco has caused the crop to fall more than 50 percent from

last season, leading to a 33 percent rise in grain import needs to near five

million tonnes. In Algeria, the crop is seen at 2.5 million tonnes, against 4.0

million last year.

This will help exporters in France, where farmers have large stocks from

last season and still expect a good-sized harvest.

Much of France's ability to conquer new markets and hold onto those in north

Africa will depend on the euro/dollar rate and the EU's export subsidy policy,

traders said.

The EU has begun the campaign cautiously, offering refunds at up to four

euros ($4.83) a tonne. Exporters say levels nearer to 15 euros are needed to

make French wheat competitive against aggressively priced Russian grain in key

markets such as Egypt.

French traders also said they expect Egypt to make more purchases via

private buyers this season rather than the state-run GASC. Private buyers tend

to be more willing to take cheaper Russian wheat, they added.

" This will be a bad surprise for French wheat this season, " one trader said.

Both Spain and Portugal have seen their harvests halved and are already

major importers. As a result, the European Union has already agreed to transfer

an initial 200,000 tonnes of grain to Portugal and 500,000 tonnes to Spain from

its bloated intervention stocks, mostly in landlocked central Europe.

Rain Saves Australian Crop

Much-needed rain in Australia looks to have now saved the country's wheat

crop, probably cutting off potentially lucrative markets in Asia from eager

European exporters.

China turned to be a net grain importer in 2004, having been a net exporter

from 1997 to 2003, and is forecast to consume 15 million tonnes more than

forecast production this year. Whilst France has already sold some wheat to

China, the chance of more big sales largely depends on the Australian harvest.

" If the Australian crop turns out to be good, then Europe will be out of the

picture in Asia, " one French trader said.

But Argentina, a thorn in European exporters' side last season in north

African markets, is still too dry in places.

The Buenos Aires Grain Exchange has cut its forecast for Argentina's wheat

area, putting it at 5.5 million hectares, 10 percent down on last year and the

lowest in the five years.

" On a world level, smaller harvests in the European Union, Argentina, North

America, India, the Middle East (Iran and Turkey); however these will be partly

offset by better harvests in China and Australia, " French analyst Strategie

Grains said.

" Given these circumstances, the world balance could tighten rapidly if

weather events cause a reduction to the Argentine and Australian harvests

compared to current forecasts. This would then have a bullish impact on prices, "

it added.

 

 

 

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Missouri Assesses Damage of Devastating Drought

By Carey Gillam

Reuters

Monday 01 August 2005

Kansas City - With little to no rain in sight, Missouri agriculture

officials met on Friday to determine how badly the summer's extreme heat and dry

conditions were hurting the state's farmers.

Conditions in 106 of Missouri's 115 counties were being evaluated to

determine whether the state should ask the federal government for a disaster

declaration to help farmers receive grants and low-interest loans. A full report

was expected to be delivered to the Governor's office within days.

" It is serious, " said Marlowe Schlegel, deputy director of the state

agricultural statistics service. " When you get to about 40 days when you don't

have any kind of rain... it gets bad. "

The US Agriculture Department on Wednesday declared neighboring Illinois a

disaster area, except for one county in the state's southernmost tip. Illinois

farmers with crop losses are now eligible to apply for low-interest loans.

Temperatures in Missouri were in the high 90s and over 100 degrees last

week. Columbia reported a high of 105 degrees on Sunday, and has had only 0.08

inch of rainfall since June 14.

Missouri agriculture officials reported this week that corn stalks were

turning brown. Soybean plants could drop blooms unless it rains soon. Pasture

conditions for livestock were rated 75 percent poor to very poor, and stock

water supplies were rated 55 percent short to very short.

" It certainly has been dry and it is hurting farmers, " said Missouri Soybean

Association executive director Dale Ludwig.

Missouri Gov. Matt Blunt plans to travel the state next week to view the

dried up crops, lowered lake and pond levels and withered lawns across the

state.

" There are some utilities that rely on the Missouri River to supply water to

communities, " said Gov. Blunt's press secretary Jessica Robinson. " Even things

like the hatcheries and the state parks and canoeing are affected. As water

levels decrease, business decreases. "

High heat and minimal rainfall has led much of northeastern Missouri to be

considered in " extreme " drought conditions. The rest of the state is rated in

" moderate " to " severe " drought, according to a report this week by the National

Oceanic and Atmospheric Administration's weekly drought monitor report.

 

 

 

 

 

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