Welcome to The Weekly Harvest, where we recap this week’s hot topics in the crop market. Here is the recap for this week:
1. Australia Produces Record Wheat Crop
According to the Australian government’s latest crop report, Aussie farmers produced a record large wheat crop. The report showed increased wheat production in the 2020/21 season, up 2.2 MMT to a record-high 33.3 MMT. This surpassed the 2016/17 wheat production record of 31.8 MMT and doubled the 2019 drought-reduced crop, which came in at only 15.2 MMT.
Overall, Australia saw improved growing conditions this season, and yields benefitted from summer rains, repairing from the multi-year drought situation. The country also grew larger-than-anticipated barley, canola, and chickpea crops.
•Barley production increased by 1.1 MMT to 13.1 MMT, up from 9 MMT in 2019/20
•Canola production bumped up by 300 KMT from the previous estimate to 4.1 MMT and came in well above the 2.3 MMT produced last season
•Chickpea production increased from the December estimate of 737 KMT, up to 755 KMT and saw a huge jump from the 281 KMT produced in 2019/20.
2. Extreme Winter Storms in U.S. Hurt Logistics and May Impact Crop Potential
The past week has seen extremely cold temperatures and large storms across much of the U.S. and Canada. The immediate impact of the cold will be on logistics. Several major North American railroad operators have already stated that rail service was stopped or stalled because of the weather conditions.
The secondary impact, potential damage to winter crops, will come into focus in the future. Much has been made about the improved heartiness of winter wheat varieties, but the prolonged nature of these extreme temperatures will impact crop potential.
Texas winter wheat was exposed to unusual temperatures for several days. With feed prices elevated by a corn supply crunch, evidence of winterkill could push even more cattle on winter wheat fields. The U.S. Department of Agriculture will put out its weekly crop conditions in early April. Many expect that a combination of bitter cold, prolonged drought, and significant winds will have those rating at or below record lows.
3. Grocery Prices Increased Expected to Continue
Commodity prices remain elevated, with many trading at multi-year highs. At the same time, consumer food demand remains high as the pandemic continues to keep people cooking at home. Further, some regions are still experiencing stockpiling. Increased demand has made raw commodities like vegetable oils, sugar, and grains more expensive for food manufacturers.
Food companies such as Kraft and Conagra Foods will likely hike the prices of many grocery staples to account for inflation. Products like mayonnaise and salad dressings are at risk of price increases due to vegetable oil usage. Same as Kraft dinner and packaged cereals due to cereal price inflation. The list goes on.
American consumers already saw food price surge last year, with year-on-year increases in food prices reaching 3.5% each month in 2020 since the beginning of the pandemic. In January 2021, U.S. consumers paid 3.7% more on average for grocery products than they did the same time last year.
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