Canada

Drought Seen Slashing Canada's Crop Output
Reuters, Aug 23, 2002

One of the worst droughts in memory will slash production of virtually all Canadian crops and total wheat production will plunge by 25 percent to lows not seen for almost 30 years, Statistics Canada said on Friday. "The 2002 crop year will be remembered as one of the worst growing seasons for western Canada. Many producers believe that conditions were the driest ever experienced in the West," Statscan said in its daily bulletin. Statscan estimated total wheat production would fall 25 percent ... Statscan said, "Spring wheat production would be down 36 percent ... Barley would be down 27 percent ... This level of Canadian wheat production is the second successive disappointing crop and having back-to-back major crop shortfalls has created an unprecedented wheat supply crisis in Canada. To further compound the world supply problems, the Australian Wheat Board has significantly cut its wheat production forecast to only 15.5 M tonnes, after stating in April that this year's crop was likely to exceed last season's 24.5 M tonnes. The US wheat crop is also the smallest since 1973 at only 47.5 M tonnes.

There remain many unknowns in the wheat market, but the world could have a reduction of over 65 Million tonnes of grain and oilseed stocks in 2002/03 with wheat declining to a year end stock of just 70 days of usage. This is a very thin cushion, and prices have continued to rise to well over the 4 year highs set last month. The chart below shows the Minneapolis spot market - clearly showing the rise of 49% or $53 per tonne (over £34/tonne) since the end of June.