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October 24, 2018

Difficult start for recently planted EU grains and oilseeds

Weeks of dry, hot weather have resulted in reduced wheat output in key producing/exporting regions in 2018 including Europe, the Black Sea, Australia and Canada. Although the full extent in Australia is still unknown, the final production figure will be highly likely to be lower than the current USDA’s 18.5MMT estimate. It implies that the cushion provided by record large stocks in 2017/18 has eroded, leaving little room for production accidents next year, even more so when coupled with supportive maize/barley fundamentals.

Although we have to remember that wheat is a weed and yields are made in May/June across the Northern hemisphere, the start of the campaign for the 2019 harvest is far from ideal. As per the map below, the drought in Europe and the Black Sea is ongoing and a widespread lack of moisture is evident across most of the continent. As such, the European Commission has warned in its October Crop Monitoring report (full report click here) that ‘ warmer and substantially dryer-than-usual weather conditions in large parts of Europe hampered the sowing and emergence of winter crops’. However, there is still time for the crops to be drilled in Western Europe and some scattered showers are forecast in parts of southern Russia but France, the largest EU wheat producer, will remain dry for at least another week.

Soil Moisture – 13th October 2018 | Source: SMOS, Gro.

Consequently, crop conditions across most of the grain belts are well below the 2001-2010 average and will need to be monitored very closely before winter arrives. Even if plantings are nearing completion in the Black Sea, emergence issues are noted. The weak root system could translate into higher winter kill with crops more vulnerable to frost whilst the insulating snow cover is totally absent for now due to well-above normal temperature.

NDVI difference from 10-yr mean (2001-2010) as of 7th October 2018 | Source: MODIS, Gro.

NDVI difference from 10-yr mean (2001-2010) as of 7th October 2017 | Source: MODIS, Gro.

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