Thursday, April 06, 2023

 

North American Wheat Production Problems Could Worsen Food Inflation

  • Drought in Midwest and Canadian Prairies impacting wheat and canola crops.
  • Premium on hard-red winter wheat reaches record-high.

  • Global food inflation likely to remain elevated due to reduced crop yields in various countries.

The spread between hard-red winter wheat and soft-red winter wheat has blown out to a record high as drought threatens crop yields across the Midwest and other major farming regions. 

Hard-red winter wheat's premium over soft-red winter wheat is $1.72 a bushel in Chicago on Tuesday morning, surpassing the 2011 record. 

James Bolesworth, managing director at CRM AgriCommodities, told Bloomberg the widening spread is "a factor of the drought in the US Plains which is detrimentally impacting crop conditions." 

The latest report from the US Department of Agriculture found Kansas (top producer) had only 19% of the acreage in good or excellent condition. Agritel analysts pointed out droughts are hitting crops in other states:

"A deterioration of the crop ratings is also visible in Texas and Colorado."

Simultaneously, drought conditions plague the Canadian Prairies. Farmers in the region are planting in some of the driest conditions in half a century. They need adequate moisture to plant wheat and canola crops, or this might lead to poor crop yields later in the growing season, which could impact global supplies. 

"If there isn't good moisture, those tiny plants are quite susceptible to adverse conditions," said Bill Prybylski, a farmer and vice president at the Agricultural Producers Association of Saskatchewan. 

The possibility of lower US and Canadian wheat production because of persistent drought conditions could exacerbate global food supplies. Already, droughts in Argentina have reduced crop yields, and wartorn Ukraine has forced farmers to reduce plantings.

All of this means that global food inflation will likely remain elevated for the foreseeable future. How to hedge higher costs at the supermarket? Plant a garden. 

By Zerohedge.com 


Commodities Trader Louis Dreyfus Plans to Exit Russian Grain Exports

Loading grain into a bulker
WFP file image

PUBLISHED APR 4, 2023 10:55 PM BY THE MARITIME EXECUTIVE

 

French commodities trader Louis Dreyfus Company (LDC) has decided to join its Western competitors in winding down its grain export operations in Russia. The 170-year-old firm had business ties in the country dating back to the 19th century, according to The Moscow Times. 

Dreyfus said that it is withdrawing from Russia "as grain export challenges continue to increase in the country," and it is evaluating its options for transferring its Russian business assets to "new owners." The company plans to continue to run its Russian operations until this process is complete, and expects that it should be out of the Russian market by July 1. 

Russia's agriculture ministry confirmed that it has received notice of cessation of activity from a subsidiary, Louis Dreyfus Vostok LLC. The ministry said that LDC's exit from the Russian market would not affect the volume of the country's food exports. 

According to industry outlet World Grain, LDC exports up to three million tonnes of grain from Russia per year, comprising up to four percent of global group sales. It runs a grain export terminal on the Don and a riverine terminal on the Volga, plus a variety of grain elevators at inland locations.

LDC's exit follows the departure of competitors Cargill and Viterra, both of which have announced similar plans. (Cargill is said to be planning to continue buying Russian grain at the pier, but it is exiting its Russian grain elevator and terminal business.)

The last Western grain trading firm with holdings in Russia, Archer Daniels Midland, is believed to be evaluating its options for its "very limited" Russian footprint as well, according to Bloomberg. The firm already scaled back its activities in Russia after the invasion of Ukraine in 2022.

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