Drought May Have Silver Lining For Producers

Jun 30, 2015

The worst drought conditions in Alberta and Saskatchewan in nearly 30 years could mean higher prices for wheat, canola and other crops, according to Patricia Mohr, commodities market analyst with Scotiabank.

“Topsoil moisture conditions in Saskatchewan and Alberta are the poorest for this time of year since 1988, a recent drought year,’ Mohr said in the latest Scotiabank Commodity Price Index report issued Monday. “Unless good rain is received by July 10, a serious drought will ensue, reducing the crop outlook.”

El Nino weather patterns around the world may bring to an end the period of favourable weather and progressively lower grain and oilseed prices of recent years, the report said.

“I assume this has to do with El Nino and with the change in the way the jet stream is working in North America that has produced these climatic changes,’’ Mohr said in an interview from Toronto. “We’re getting wet weather in Ontario and there’s been very wet weather in the U.S. Midwest as well.’’ Manitoba is faring much better, with near normal rain and prospects for high, even record yields.

But traditional wheat-growing areas of the world, like the Canadian Prairies, France and Australia, are experiencing drought for the first time in years and that is putting upward pressure on wheat prices, she said.

“The grain market is starting to recognize the potential (impact) for El Nino on the crop results. What we’re seeing is dryness in the European Union, particularly France, and France is the biggest wheat-growing area in the EU. And (there’s) also dryness in Western Canada and the potential for dryness in Australia in the northeastern corner, which is a wheat-growing area,’’ she said, noting that “Australia is the fourth-biggest wheat exporter in the world.”

Dry pasture lands are already having a significant impact on the ranch and cow-calf sector in Alberta and Saskatchewan. Unless rain occurs soon, cattle producers may be forced to sell grass-fed cattle and calves at a time when they should be retaining heifers to rebuild cattle numbers, now at the lowest level since the 1970s due to record prices, the report said.

Source : Leaderpost

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