Angst over the weather has reached a fevered point in the world of crops.
Global inventories are shrinking and demand is on a tear as drought plagues farms in key producers from the US and Brazil to Russia. As a result, every rain shower and extreme spell is subject to extreme scrutiny. Grain futures reached near-decade highs last month before paring gains amid a strong planting season.
Now, too little or too much rainfall in key producers will count a long way in determining whether crop prices rise on year or further descent.
In the United States, traders and investors generally focus on giant corn and soybean growers like Iowa and Illinois. They're now obsessing over droughts in second-tier producers in the Northern Plains. The droughts of Brazil also hurt the corn crop at a time when China is searching the globe for all the grains it can find in order to feed its hogherd, the largest in the world.
'Every bushel matters, said Kevin McNew, CEO of agricultural-tech firm Farmers Business Network. Even though we may be talking about drought in lesser growing area like the Dakotas for corn.
This year's weather pattern is particularly difficult because while some areas are suffering from barren farmland, too much rain in other regions is threatening crops and increasing market volatility.
The most conservative corn, soybeans and benchmark winter wheat futures contracts in Chicago have eased in the past four weeks as favorable weather aided crops. The Bloomberg Grains Spot Subindex, which is down more than 70% in the last year, is now up 7% since early May.
Increased anxiety over weather comes as market markets await the U.S's monthly World supply and demand report, known as WASDE, due for release Thursday. According to a Bloomberg survey on corn, the agency is expected to lower the forecasts for global stockpiled stocks as well as Brazilian output.
The U.S. Department of Agriculture isn't expected to make huge changes, but rather a wait-and-see '' approach, according to Ken Morrison, a St. Louis-based independent commodity trader.
The agency, which is expected to release on June 30 a highly anticipated update on planted corn and soybean acres, may want more time to monitor weather patterns.
The U.S. farmers are still haunted by the abrupt dry season of 2012, which shattered crop yields and hit most of the country. Though this year, 'typical summer rainfall' is possible in the central and eastern Midwest, said Dan Hicks, meteorologist at Freese-Notis Weather in Des Moines, Iowa. Danger zones for intense dryness in the Farm Belt include the Northern Plains and the northwestern Midwest, including parts of Iowa, the top U.S. corn grower, he said.
Any hint of production problems in the U.S. grain belt could be 'explosive, McNew said in a Drought Outlook Report.
Hoe-Hoax - downpours in the Central Plains last month saved severe winter wheat in Kansas and adjacent states from late dryness. But that have led to delayed problems, including crop quality concerns and new harvests.
In North Dakota, which is used much of America's cold spring wheat grown in pizza dough, croissants and bagels, wet temperatures and lack of rain is damaging crop progress.
A similar dynamic is playing out across the Atlantic. After the May rains, farmers in the European Union and Russia expect to reap lush winter-wheat crops, while stretches of the spring-wheat region of the top shipper Europe are suffering from a wet spell.
'The weather had to be perfect and it hasn't been, said Jacqueline Holland, an analyst at Farm Futures. The question now is how the rest of the growing season shapes up.
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