The U.S. drought eased after snow from Texas to Wisconsin combined with above-average rainfall east of the Mississippi River, said AccuWeather Inc. The USDA still forecasts a 7.4% drop in the harvest to 57.2 million tons this year.
The Northern Hemisphere’s winter-wheat crops are off to a poor start, Goldman Sachs Group Inc. analysts including New York-based Damien Courvalin said in a report March 11. The bank expects prices to rise to $7.80 in three months. A further drop in global supplies in 2013 would mean inventories declining to critically low levels, the analysts said.
Winter crops in the U.S., which accounted for about 74% of the area planted last year, were in the worst condition since at least 1985 as they went into dormancy in November, USDA data show. Plants should resume growth this month and are harvested from May.
“You’re coming into a very critical window,” said Alan Winney, chairman of Emerald Group Australia Pty, which says it’s the third-largest storage and handling network in eastern Australia. “If you start to get some dry weather or weather concerns you could see the market rebound quite quickly. If we continue with the same generally stable weather around the world, I think we’ll go lower.”
Changing weather can drive sudden changes in prices. Wheat averaged about $6.41 in the first five months of 2012, before surging more than 50% in about seven weeks as drought emerged in the U.S. and Europe. The grain reached $9.4725 in July, the highest in four years. While the $6 projected in the Bloomberg survey is higher than the $5.58 average in the past decade, it is less than half the record $12.825 close in 2008.
The ratio of global stockpiles to demand in 2013-2014 will be 26.9%, according to Rabobank International. While up from 25.8% in 2012-2013, it’s lower than the average of 27.6% in the five years to 2011-2012.