Bloomberg News
CHICAGO -- Droughts withering wheat crops
from the United States to Russia to Australia will probably spur the biggest
reduction in global supply estimates since 2003 and drive prices to the highest
in almost a year.
Kansas, the top U.S. grower of winter wheat,
is poised for its driest May on record, the state's climatologist estimates.
Ukraine and Russia, accounting for 11 percent of world output, have endured
drought conditions for three months, University College London data show. The
U.S. Department of Agriculture may cut its global crop estimate by 1.2 percent
next month, the biggest drop in a June report since 2003, according to the
average of 18 analyst estimates compiled by Bloomberg.
Wheat traded in Chicago rose as much as 18
percent in the 10 days through May 21 on concern that the market is returning
to the droughts of 2010. Russia and Ukraine curbed exports that year and prices
more than doubled to $9.1675 a bushel by February 2011, the month when world
food costs tracked by the United Nations rose to a record. Analysts surveyed by
Bloomberg expect futures to gain 12 percent to $7.51 by mid-July.
"In 2010, everyone was talking about
dryness in Russia even in May, but no one was paying attention," said
Chris Gadd, an analyst at Macquarie Group in London. "Because you've had
the history of 2010, people are going to the other extreme and overreacting a
little. If weather conditions deteriorate further, production estimates could
go a lot lower."
Futures surged to an eight-month high of $7.22
on May 21 on the Chicago Board of Trade. The grain's 2.6 percent advance this
year makes it the third best performer in the Standard & Poor's GSCI Index
of 24 commodities behind soybeans and gasoline. The gauge's 4.1 percent drop
since the start of January compares with a 0.2 percent gain in the MSCI
All-Country World Index of equities. Treasuries returned 1.4 percent, a Bank of
America Corp. index shows.
The USDA said May 10 that global wheat output
will decline 2.5 percent to 677.56 million metric tons in the crop year
beginning June 1, leaving stockpiles of 188.1 million tons at the lowest
relative to demand since 2009. The department will probably cut the production
forecast to 669.15 million tons in its June 12 report and reduce the inventory
estimate to 183.3 million tons, according to the Bloomberg survey.
Kansas got 0.39 inch (0.99 centimeter) of
rain in the first 20 days of May, according to Mary Knapp, the state's
climatologist. The record low of 0.98 inch for the entire month was set in 1966,
the Manhattan, Kansas-based scientist said. Analysts were predicting record
wheat yields for the state as recently as three weeks ago.
As much as 30 percent of the grain harvest in
eastern and southern Ukraine may be lost because of damage from dry weather,
said Tetiana Adamenko, the head of the agro-meteorology department at the
National Meteorology Center in Kiev. Russian wheat output may drop 15 percent
this year if below-average rainfall persists in southern regions during the
flowering period for the next two weeks, Macquarie estimates.
While dry weather is depriving winter plants
of the water needed to develop kernels, there's still time for improvements
before harvesting starts next month. Futures jumped 29 percent in July and
August last year because of concern about drought, before tumbling 23 percent
in the following month as rainfall revived crops and harvests exceeded analysts'
estimates.
Winter wheat accounted for about 75 percent
of U.S. output last year and is the main variety grown in the Black Sea region.
No comments:
Post a Comment