The drought parching fields across parts of Canada risks triggering a shortfall in global wheat exports, according to Australia & New Zealand Banking Group Ltd., which said the event was being compared to dryness in 2002.
Continuing drought in Canada may create a 12 million metric ton shortfall in wheat exports, Senior Agricultural Economist Paul Deane wrote in a report on Wednesday. Forecasts offered little relief, with a strong, high-pressure system set to bring high temperatures and little rain that would add to crop stress and may cause irreversible yield loss, he wrote.
Wheat futures in Chicago rallied to the highest level since December on Tuesday amid dry weather in Canada as well as parts of Europe and excess rains across the U.S. Canada’s spring-wheat prospects have been hurt by drought, Whitefish Bay, Wis.-based Martell Crop Projections said last week, citing deficient rainfall in Saskatchewan and Alberta. Shipments from Canada slumped 42 percent to 9.4 million in 2002-2003, according to data from the U.S. Department of Agriculture.
“Unfavorable weather in North America has been the main reason grain prices have awakened from their slumber,” Deane wrote in the two-page report. While too much rain has fallen in the U.S., the Canadian prairies have been too dry, he said.
Most-active futures rallied 5.5 percent to $6.1575 a bushel on the Chicago Board of Trade yesterday, the highest close since Dec. 23. The contract for delivery in September traded at $6.1025 a bushel at 3:52 p.m. in Singapore.
“Canadian weather over the next month will be key in supporting current prices,” Deane said. “A continuation of the drought in Canada is likely to be needed to support wheat futures above $6 a bushel.”
The 2015 season in Canada is starting to be compared to the 2002 drought, when wheat output fell to about 15 million tons, Deane said. In last three years, Canada’s crop averaged 31 million tons, and if conditions deteriorated further this year, exports may more than halve, he said.
Wheat farmers in Australia’s east are preparing for increased dryness with the onset of the first El Nino since 2010. The periodic weather pattern, which can crimp rainfall, risks cutting Australia’s wheat crop to the smallest in eight years, according to National Australia Bank Ltd.