A month into 2013, what will drought do to grain this year?

The US government in 2013 January declared much of the central and southern US Wheat Belt a natural disaster area due to persistent drought threatening the winter wheat harvest.

Drought has tightened its dry grip on US winter wheat, reducing the condition of crops in Kansas, the top producing state, and neighbouring Oklahoma, said this report by Agrimoney. Estimates of the proportion of the crop in “poor” or “very poor” health at 39%, up from 31% at the end of December. The figures also represented a sharp deterioration from a year before, when 49% of winter wheat was rated good or excellent, and 12% poor or very poor.

The result of the continuing drought has been poor conditions for all fall-planted crops and limited grazing of small grains, Agrimoney quoted officials as having said. Most districts received 50% or less of normal rainfall last month, at a time when they had already been in drought for months.

The US Drought Monitor and the associated long-range forecasts spell trouble for grain stocks, movement and of course prices for 2013. Severe to exceptional drought conditions cover most of the cultivation area for hard, red winter wheat, running from the Texas panhandle to Colorado to South Dakota, the US Drought Monitor shows. Winter wheat crops were in the worst condition since at least 1985 at the end of November, according to the US Department of Agriculture.

Bales of corn stalks covered with snow in the state of Nebraska, USA, in late December 2012. Despite some big storms in December, much of the US is still desperate for relief from the country’s longest dry spell in decades. Photo: AP / Nati Harnik

In Russia, grain exports are expected to slump further, as also reported by Agrimoney. Russia’s farm ministry is to cut to 14m tonnes, from 15.5m tonnes, its forecast for grain exports in 2012-13. Trade at that level would represent half the 28m tonnes shipped in 2011-12 (USDA estimates) and imply only minimal exports for the rest of the season, with the tally already at some 13m tonnes.

In Britain, a third Agrimoney report on the impact of weather on grains has said, crop prices have soared thanks to the poor results from 2012 harvests, which showed the lowest wheat yields in 20 years and smallest potato crop since the 1970s. London wheat futures hit a record high of £227.00 a tonne last month, and remain at elevated levels, of £213.40 a tonne for the spot March contract, while potatoes are selling on the open market at £312.28 a tonne, more than triple their levels a year ago, according to the Potato Council.

Bloomberg has reported that the prices of wheat rose in Chicago as US production prospects “dimmed because of a persistent drought in the Great Plains, the biggest growing region for winter crops”. The Bloomberg report explained that the “central and southern plains [of USA] will have mostly below- normal rainfall in the next 10 days, with no significant relief expected”.

Roughly 57.64 percent of the contiguous United States was in at least ‘moderate’ drought as of 2013 January 22, reported the Huffington Post, which is a marginal improvement from 58.87 percent a week earlier. But the worst level of drought, dubbed ‘exceptional’, expanded slightly to 6.36 percent from 6.31 percent of the country.