World weather problems overdone?
The recent South American (SAM) drought has been receiving a great deal of attention recently, with some media outlets claiming the SAM "drought" has impacted yields severely in affected areas, and eminent drastic cuts in SAM production estimates are forthcoming.
However, in monitoring recent week's weather, the drought affected area has had recent rains the past 2 weeks which should have alleviated some of the drought problems. It has rained in both Argentina and southern Brazil, both areas that the previous six weeks had suffered under dry conditions(but not very warm). And forecasts, as of this morning, for the coming two weeks include more timely rainfall in these two areas.
The problem with too much hype for a SAM drought is that much of SAM wasn't enduring any problems. The central and northern Brazil regions have enjoyed below average temps for virtually the entire growing season, with seasonable rainfall that has kept yield potential in these areas record large. That is not a recipe for a huge rally in the grain markets!
Now that SAM weather is improving, the focus has turned weather-wise to the Former Soviet Union region, where temps are averaging well below normal currently, with some regions seeing temps as much as 10-15 degrees below normal for this time of year. That is generating talk of dramatic freeze damage to the FSU crop, and now wheat prices are starting to see some price response to the bitterly cold temps forecast in the FSU region.
The only problem with getting too bullish on cold Jan/early Feb. weather is that the track record for freeze damage to winter wheat during the dead of winter is slim at best. Typically, more freeze damage occurs to crops in late spring (late March/early April) than at any time during the dead of winter. Its likely that while the cold weather is bitter to suffer through for humans, winter wheat usually doesn't suffer damage from the dead of winter cold temps.
US winter wheat, meanwhile, has recovered somewhat from a severe drought in 2011, to winter wheat conditions in 2012 that has improved through most of the winter. Frequent rains has occurred especially in the eastern HRW wheat belt that has replenished soil moisture deficits in the eastern HRW wheat belt, and have allowed the crop conditions in KS, OK, and TX to improve significantly above the 2011 levels. Basically, the US HRW wheat crop has improved in yield potential since freeze up, and the balmy temps in the US certainly have not threatened the winter wheat crop here!!!