‘Megadrought’ threatens crop yields in America and global grain inventories, warns USDA
Crops in the country keep dying because of the scorching heat. And according to various reports, the same thing is happening in other countries across the globe.
Because of the megadrought affecting key states in America, the already high prices of crops like corn and wheat continue to skyrocket.
“Megadrought” drives up prices of US crops
Farmers in America are struggling because of a drought that is affecting key U.S. cash crops and further increasing prices for staples like corn and wheat.
The droughts that started this summer continue to affect farmers this August. At the Pro Farmer Crop Tour, an annual event where farmers go to major growing areas throughout the grain belt to gather data on the coming harvest, participants experienced firsthand just how badly farms did amid the drought.
Farm incomes struggled these past two years because of two factors: One was when coronavirus (COVID-19) shutdowns affected crop prices. Drought also significantly reduced output, limiting farmers’ capacity to make the most of increasing demand and higher prices.
Data from the U.S. Drought Monitor showed that extreme drought affected most of North Dakota, South Dakota, Minnesota, Iowa and Nebraska. Meanwhile, data from the National Oceanic and Atmospheric Administration revealed that both North Dakota and Minnesota are going through near-record lows in soil moisture.
The droughts decimated many crops planted this spring. According to data from the Agriculture Department, at least 63 percent of the U.S. spring wheat crop is “in poor or very poor condition,” compared to only six percent in 2020.
The poor weather also forced the USDA to be more conservative with its expectations for U.S. crop production in 2021. This then resulted in domestic inventories dwindling.
According to the USDA’s latest monthly supply and demand report, the agency pegged all ending stocks for corn, wheat and soybeans at their lowest level since 2013.
Crops in Brazil and Russia also affected by drought
Brazil’s second crop of corn, grown in the winter, was also significantly diminished because of drought. The country’s crop agency predicts that its winter crop will go down to 60.3 million metric tons, compared to 75.1 million tons around the same time in 2020.
In Russia, wheat crops have also withering because of drought, with forecasters also forced to cut their outlook for wheat production.
For the USDA’s latest agricultural supply and demand report, it pegged its forecast for Russian wheat at 72.5 million metric tons. The figure went down by 12.5 million tons from its estimate in July. The estimate was also below estimates from other firms tracking the region.
Andrey Sizov, head of SovEcon, a Russian agricultural research firm, said that for the season, dry July weather and smaller wheat area numbers “were a game-changer for the Russian crop.”
In a note published earlier in August, Sizov explained that soil moisture in wheat-growing regions in Russia was at its lowest levels within the last decade.
French flour costs increase due to poor wheat quality
A fall in the average quality of France’s soft wheat harvest in 2021 resulted in an increase in flour prices. The price hike was due to additional work for millers who had to sort good grains from poor ones, said a senior member of ANMF, a French millers group.
Erick Roos, chairman of ANMF’s process commission and director-general of Moulins Soufflet, one of Europe’s biggest millers, explained that the price hike won’t impact the total volume of flour produced in France this 2021.
French soft wheat prices on the cash market went up by 70 euros per tonne (1,000 kg), or nearly a third, in the past month. September prices were the highest front-month price since March 2008 on Aug. 23 as the market wrestled with rain damage to the EU crop and lower global supplies.
French flour output in 2021 was still expected around 2020’s at 3.6 million tonnes. The industry usually consumes less than five million tonnes of milling wheat annually. However, this year’s wheat crop in France is expected at nearly 37 million tonnes.
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