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US and Canada heatwave hammers crops, forcing up global grain prices

Sunday July 18, 2021 - 00:02 EST

A heatwave across the United States and Canada is having a devastating effect on crops and pushing grain stocks low.


It is good news for Australian farmers, though, as the price of canola is rocketing.


In the United States, temperatures in some regions have risen to 50 degrees Celsius, smashing previous records, while Canada is in the grip of its worst drought in two decades.


Temperatures have risen to record levels in the Pacific North West and parts of California.


According to the US federal government drought indicator, the country hasn't seen such dry conditions in the West or Washington State since the late 1800s.


Farmers prepare for losses


Fourth-generation farmer Nicole Berg said she would only harvest half her crop.


Berg's family farm is based near the epicentre of the heatwave at Patterson, Washington.


She expects her income to fall dramatically. 


"I can't even buy a coffee with an acre of wheat."


Canadian drought


Trevor Sherman, who farms near Battleford in the Canadian state of Saskatchewan, said he had been lucky to jag some rain, but that wasn't the case for others.


"My crops are holding on, but the forecast is for seven days of 33 to 34-degree heat," he said.


"We've already had two weeks of over 30-degree temperatures and that's unheard of for us."


Mr Sherman has travelled widely across southern Saskatchewan and Alberta this week, an area spanning millions of acres, and he said there were few bright spots.


"In all of that area, people have given up on it.


"If they've got cows, they've put them out [to feed on the crop], or they're trying to cut what they do have for feed for the winter," he said.


He thinks it is as bad as the drought in Canada in 2002-2003.


"There will be durum crops that run 10 [bushels to the acre], canola crops that run five to 20, wheat crops that run five to 10."


In metric terms, 10 bushels of wheat to the acre is around 0.67 tonnes to the hectare,  about 20 per cent of the average yield for a Canadian wheat crop.


"There's a lot of wheat where if you put a beer can in between the rows, that's how tall it is," Mr Sherman said.


"They just can't come back now. We needed water two weeks ago.


'Unbelievable' canola price


The forecast for corn, soybean and spring wheat crops in the US is being downgraded, leaving stocks "dramatically low", according to the latest World Agricultural Supply and Demand Estimates report.


Wheat prices were at $770/tonne in May, then fell and have since climbed again to $684/tonne as the crop estimates come in lower than expected. 


Dennis Voznesenski, a grains and oilseeds analyst with Rabobank, said the improvement in canola prices had been substantial in the last week, and that was flowing through to Australia.


Non-GM canola in Western Australia is trading at $755/tonne and GM canola at $720/tonne, while the Canadian futures market is running hot, as high as $1,000/tonne. 


"They are the kind of figures where you go, 'Hang on, is my data right' and you have to check it a couple of times because they seem unbelievable."





Canadian canola prices are double the 10-year average.


Commodity analyst Tobin Gorey from the Commonwealth Bank is warning that grain prices can be volatile, but he said futures for spring wheat and canola had kicked up on the exchanges in Minneapolis and Winnipeg.


"Only 20 per cent of the US wheat crop is rated good, and we still have a way to go before it is in the bin.


"The world supply situation is so tight that it only takes a small downgrade in crops somewhere for prices to really lift.


The hot weather is expected to continue in the US all the way into August, so the prices will probably stay high.


"Considering the good growing conditions in the crop in Australia, that is good news for our growers," he said.







- ABC

© ABC 2021

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