The U.S. has little room for crop losses due to unfavourable weather because the government already projects tight soybean supplies, analysts said. Some worries over field conditions are creeping into the market.

“There are some reports in the fields that soybeans and canola are a little bit disappointing,” said Craig Turner, commodities trader at Daniels Trading.

“It does sound to us that maybe the pods are a little bit smaller and the counts are a little bit less than we were expecting in Illinois and Iowa.”

Most-active soybean futures ended up 6-1/2 cents at $13.30 a bushel and reached their highest price since Aug. 4 (all figures US$).

Corn futures also settled higher, with the most-active contract rising 4-1/4 cents to $4.85-3/4 a bushel after recovering on Wednesday from a December 2020 low.

The corn market temporarily pared gains after Washington escalated objections to Mexican curbs on genetically modified corn imports, amid concerns the spat could threaten U.S. exports to Mexico.

U.S. farmers will harvest corn and soybean crops this autumn, and August is the key month of development for soybeans.

The U.S. Department of Agriculture warned hot weather poses a risk to farms.

“A punishing heat wave will grip much of the south and the nation’s mid-section, including the western Corn Belt, where temperatures approaching or reaching 100 F (38 C) could adversely affect filling summer crops,” USDA said in a daily weather report.

Market gains did not extend to wheat futures, which were weighed down by unimpressive U.S. export demand and expectations for large Russian shipments, traders said.

India is in talks with Russia to import wheat to curb food inflation, sources told Reuters.

Most-active CBOT wheat futures closed 7-3/4 cents lower at $6.15-1/4 a bushel.

— Reporting by Tom Polansek in Chicago; additional reporting by Gus Trompiz in Paris and Enrico Dela Cruz in Manila.

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The worldwide impact can be enormous, but the stakes are higher for emerging markets, which are more exposed to swings in food and energy prices and production and often have smaller fiscal buffers that limit their ability to cushion the impact.

Below are five charts showing the impact El Niño – when waters in the central and eastern Pacific are warmer than usual – could have on key emerging markets.

Most vulnerable

India and Egypt are among the economies that are overall most vulnerable to El Niño’s impact this year, according to an index by Standard Chartered Bank, taking into account the weight of the primary sector, the share of food in inflation baskets and a country’s ability to offset through fiscal support.

Ghana, Kenya and the Philippines are also high up on the list while countries such as South Africa and Chile are among the least vulnerable – together with most of the developed market economies such as Germany or the United States.

“We believe that the countries most at risk from an El Niño event this year are those that have relatively weak economic fundamentals and that experienced relatively weak agricultural production during the 2014-16 El Niño period,” said Eugene Klerk, head of ESG Research at Standard Chartered Bank.

Agricultural pressures

Sudden changes in rainfall or temperature can wreak havoc on crops. With agriculture accounting for a larger share of the economy and employment in Africa and South Asia than elsewhere, these regions are especially vulnerable to the El Niño fallout.

“A sharp reduction in the volume of crops that can be exported could result in balance of payments strains for some economies,” according to a research note led by Jennifer McKeown, chief global economist for Capital Economics.

India has banned exports of a key variety of rice, cutting overall supplies to world markets by a fifth. Nearly 90% of rice is produced in Asia, and threatened by dry El Niño weather, with the Philippines and Thailand also at risk. Other produce in focus includes cocoa from Ivory Coast and Ghana, sugar from India and Thailand and coffee from Vietnam and Indonesia.

There are, however, exceptions – Argentina had a record soy harvest in previous El Niño episodes, according to Morgan Stanley.

“El Niño tends to be negative in EM, though Argentina is an exception,” the bank’s Fernando Sedano wrote in a note, adding “Argentina is likely the only net winner of El Niño.”

Fragile food

Food prices make up a larger share of the CPI baskets of emerging markets – as much as 40% in many low income economies – so El Niño’s severity is set to directly impact inflation.

A European Central Bank analysis suggests that a one-degree temperature increase during El Niño historically has raised global food prices by more than 6% after one year.

Southern Africa, Central America and the Caribbean and parts of Asia are of “particular concern” due to already high levels of food insecurity, according to the Food and Agriculture Organization of the United Nations(FAO).

David Rees, senior emerging markets economist at Schroders, warned that a strong El Niño could push emerging market food inflation back into double digits in 2024.

Hydro question

Significant changes to rainfall, or prolonged droughts, could also impact hydropower output and boost gas and coal prices as a result, according to Capital Economics.

“Several countries, mostly in Africa, are heavily reliant on hydroelectricity,” the note said. “Lower rainfall could hinder electricity generation and possibly lead to power rationing.”

Energy prices are also a key driver of food inflation, they warned, while warmer temperatures could increase demand for air conditioning.

Clouding the inflation picture

Latin American central banks were among the first to ramp up interest rates after COVID-19 to fight rising prices, and are the first to kick off easing, led by Chile and Brazil.

But the El Niño impact on agricultural production and electricity generation could complicate disinflation, and lead to higher-for-longer rates.

“Colombia and Peru are the most exposed countries, followed by Chile and Brazil to a lesser extent,” said BofA’s Latam local market strategist Antonio Gabriel.

BofA estimates that El Niño would be “at least of moderate intensity this year”, but severe intensity could raise inflation by up to 2.5% in Colombia and 1.5% in Peru.

“Mexico seems mostly isolated,” Gabriel added.

–Reporting for Reuters by Jorgelina do Rosario and Libby George.

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Wheat futures rose as traders awaited the outcome of Egyptian wheat purchase negotiations, as well as talks on a possible deal to boost grain exports from war-torn Ukraine.

Turkish President Tayyip Erdogan said he wants a general agreement reached between Ukraine, Russia, Turkey and the United Nations on a U.N.-led plan to resume Ukrainian Black Sea grain exports to be put in writing this week.

Chicago Board of Trade November soybeans settled down 26 cents at $13.32-1/4 per bushel (all figures US$). December corn ended down 5-1/4 cents at $5.90 a bushel, while September wheat rose 7-1/4 cents to settle at $8.19-1/2 a bushel.

Soy and corn fell as traders focused on weather forecasts for the United States, where rains expected next week were seen easing some of the stress on crops from a hot spell that has scorched the southern Plains and extended into the Midwest.

“Traders are a little more optimistic that when this (high pressure) ridge shifts back and forth across the U.S., it will bring some fronts in,” said Terry Reilly, senior commodity analyst with Futures International in Chicago.

Corn drew underlying support from bullish weekly ethanol data, Reilly noted. The U.S. Energy Information Administration said weekly production of corn-based ethanol rose last week to 1.03 million barrels per day, the first increase in five weeks, and stockpiles fell slightly.

Wheat traders awaited results of wheat purchase negotiations by Egypt, the top global importer of the food grain. After the CBOT close, traders said Egypt’s state grains buyer, GASC, was believed to have bought an estimated 640,000 tonnes of wheat in direct negotiations with trading houses. The purchase mostly involved wheat from Russia and France, with some from Germany and Lithuania, traders said.

GASC on Tuesday had rejected offers in a separate tender for the same shipment periods, in which traditional supplier regions in the Black Sea and Europe were excluded, with only wheat from the United States offered.

— Reporting for Reuters by Julie Ingwersen in Chicago; additional reporting by Naveen Thukral in Singapore and Sybille de La Hamaide in Paris.

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Temperatures were forecast to reach 111 F (44 C) in parts of the Texas Panhandle, a core area for cotton and cattle production.

While much of the U.S. spring crop growing areas have seen rain, the southern edges of the Midwest are struggling with heat and drought, potentially cutting into U.S. production potential at a time low global crop supplies have contributed to high food prices.

“If you look at the crop conditions, the biggest problem is in Texas,” said Jack Scoville, vice president at Price Futures Group in Chicago. “A lot of the cotton has already seen some permanent damage this year,” Scoville said.

More than three-quarters of Texas is under severe drought or worse as of July 12, the largest area under that classification for the country’s top cotton state in nine years, according to U.S. Drought Monitor data.

The U.S. Department of Agriculture rated 38 per cent of the U.S. cotton crop in good to excellent condition late on Monday, the lowest for this time of year since 2011. In Texas, only 21 per cent of the crop was rated good-to-excellent.

“The Texas crop is not going to see a recovery,” said Keith Brown, principal at Georgia-based cotton broker Keith Brown and Co.

Cattle are being taken off parched grazing pastures in Kansas, Missouri, Oklahoma and Texas and moved to feedlots or slaughterhouses, said Brian Hoops, president of Midwest Market Solutions.

Pockets of dryness have also emerged in the heart of the U.S. Corn Belt, but forecasts called for beneficial rains in much of the region next week, said Joel Widenor, a meteorologist with the Commodity Weather Group.

Still, areas on the fringes of the crop belt are stressed. In southwest Missouri, some farmers are cutting their corn for silage instead of waiting to harvest in the fall, Hoops said.

“It’s a bad situation for producers in this area. I have a hard time believing that we are going to see the type of a national (corn yield) average that the USDA is forecasting,” Hoops said.

— Reporting for Reuters by Julie Ingwersen; additional reporting by Arpan Varghese, Kavya Guduru and Karl Plume.

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Hot air, high humidity, sunshine and hot surfaces can raise body temperatures to dangerous levels. Add physical activity and the results can be life-threatening.

Workers and employers need to know the risks of working in hot conditions, according to SAFE Work Manitoba.

“Both employers and workers can take measures to protect against the dangers that hot weather presents, preventing illness and avoiding lengthy work delays,” said Jamie Hall, chief operating officer of SAFE Work Manitoba, in a press release.

“We recommend becoming knowledgeable about the signs of heat illness and aware of what is happening with workers as temperatures climb.”

Below are common signs and symptoms of heat exhaustion. Anyone experiencing these symptoms should move to a cooler place and drink plenty of fluids, preferably water.

• high body temperature
• dizziness/fainting
• nausea/vomiting
• heavy sweating
• rapid breathing and heartbeat
• skin rash
• muscle cramps
• headache
• extreme thirst
• confusion and lack of co-ordination
• dark urine and decreased urination

Heat stroke is a more serious form of heat illness with these signs and symptoms and it is a medical emergency. Call 911 immediately. While waiting for help to arrive, move to a cooler place, apply cold water to large areas of the skin and use a fan.

• very hot, red skin
• lack of sweat
• high body temperature
• confusion and lack of co-ordination
• dizziness/fainting

If working in the heat, follow these safety tips to help prevent heat illness:

• drink plenty of water throughout a shift, before feeling thirsty
• limit intake of caffeine
• mist yourself with cool water
• take regular rest breaks
• whenever possible, do demanding physical work before 11 a.m. and after 3 p.m.
• take rest breaks in a cool, well-ventilated area
• wear light-coloured, loose-fitting clothing made of a breathable fabric like cotton
• watch for signs and symptoms of illness in yourself and co-workers

Employers can help prevent heat illness among employees by taking these steps:

• remain aware of heat conditions
• do not allow employees to work alone
• create cooling areas that offer shade and water
• provide fans for indoor work in the absence of air conditioning
• set appropriate work-rest cycles ahead of heat waves
• have emergency procedures and first-aid coverage in place
• work with the safety and health committee, worker representatives or workers to create a hot weather plan and modify work procedures during high temperatures.

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The deaths add pain to the U.S. cattle industry as producers have reduced herds due to drought and grappled with feed costs that climbed as Russia’s invasion of Ukraine tightened global grain supplies.

The Kansas Department of Health and Environment knew of at least 2,000 cattle deaths due to high temperatures and humidity as of Tuesday, spokesperson Matthew Lara said. The toll represents facilities that contacted the agency for help disposing of carcasses, he said.

Kansas is the third largest U.S. cattle state behind Texas and Nebraska, with more than 2.4 million cattle in feedlots.

Cattle began suffering heat stress as temperatures and humidity spiked over the weekend in western Kansas and cooling winds disappeared, said Scarlett Hagins, spokesperson for the Kansas Livestock Association. The animals could not acclimate to the sudden change, she said.

“It was essentially a perfect storm,” said AJ Tarpoff, beef extension veterinarian for Kansas State University.

Temperatures reached 42 C in northwest Kansas by Monday, said Drew Lerner, president of World Weather Inc. This weekend, parts of western Kansas and the Texas panhandle will near 110 F (43.3 C), though stronger winds and lower humidity levels will help minimize cattle deaths, he said.

“It’s going to be oppressively hot and stressful for the animals,” Lerner said.

To survive, ranchers are providing cattle with extra water and checking their health.

“You can’t say, ‘Oh, I checked them three days ago,’” said Brenda Masek, president of the industry association Nebraska Cattlemen. “When it gets hot, you’ve got be to out every day and making sure that their water is maintained.”

— Tom Polansek reports on agriculture and ag commodities for Reuters from Chicago.

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Well, it might be hard to believe, but last month the planet recorded its fifth-warmest April on record. There was only one major region on Earth that showed below-average temperatures, and you guessed it — it was across a large part of central North America. Lucky us!

What the heck is going on? You may recall discussions we have had in the past on the general setup of weather patterns on Earth. The equator is always warm, and the poles are always cold. Sure, the poles warm a little bit each summer, especially the north polar region due to the fact that it is an ocean, but compared to the equator it is cold. Now, this cold air over the poles does not always just sit nicely right on top of the poles, but it drifts around nudged in different directions depending on what is happening in the mid-latitudes. This year it just so happens that conditions around the globe resulted in some large ridges of high pressure building across Russia, which brought warm temperatures to that region but also helped to deflect some of the cold air usually over this region. The cold air had to go somewhere else, and, as it turns out, it ended up over us.

This southward displacement of arctic air is also what is helping to fuel the storm systems and resulting rains we have been seeing for over a month now. Just like with thunderstorms, areas of low pressure feed off temperature differences; the bigger the difference, the stronger the low can be. Add in the fact that the current setup across North American is allowing for a lot of Gulf of Mexico moisture to move northward, and the stage is set for rain, and lots of it.

OK, so that’s the ‘why’; the billion-dollar question is, ‘When will this pattern break down?’ Because to be honest, time is running out for farmers in some regions of Manitoba. Well, if you have already read the forecast then you know this wet pattern does not look like it is totally done with us yet. If you have not read the forecast, then maybe don’t. It does look like we should be transitioning into a warmer pattern, but the weather models are still hinting at keeping us wet. One positive view is that often when the weather pattern switches, the weather models can really struggle as they try to hang on to the current pattern. I will keep my fingers crossed that we are seeing the beginning of a pattern switch.

Compression

Now, on to severe summer weather and heat waves. To get those truly hot, long-lasting summer heat waves we need a ridge of high pressure to develop and then park or get stuck over our region. The ridge of high pressure allows for a couple of things to happen. First, the descending air in the area of high pressure inhibits the growth of clouds; this in turn means plenty of sunshine, and in the summer, sunshine means heat. On their own, sunny skies do not mean a heat wave; we see plenty of sunny days in a row without experiencing a heat wave.

The next part has to do with the strength of the high. When the high is strong, we get very strong subsidence or sinking of air. As this air is pushed downward, it hits the ground and is compressed. Now, anyone who has used an air compressor, or even just a hand pump, knows that as you compress air you are forcing the air particles closer together, which in turn increases the rate of particle collisions, and these collisions transfer energy which we feel as heat. Don’t believe me? Grab a bike pump, give it 20 or so pumps and then feel the bottom of the pump — it’s hot, due to the compression of air.

So, when there is a strong ridge of high pressure over us, the compression of sinking air can dramatically heat the air and give us some truly warm days. Now, if the upper high is not that warm, then all this compressing and heating of the air won’t do that much to give us record-breaking temperatures. If the upper high is warm to begin with, then this compression of air, combined with the additional heating of the sun, can really push the temperatures up.

That is about all I have room for in this issue. I will re-explore this topic in a little more detail soon. Hopefully, we will see some heat soon, maybe not record breaking — just imagine how it would feel if record-breaking heat moved in with all the water around. But some nice warm weather would really help improve the state of mind for many people.

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The drop could curb Indian exports of the staple. Cashing in on a rally in global wheat prices after Russia invaded Ukraine, India exported a record 7.85 million tonnes in the fiscal year to March — up 275 per cent from the previous year.

Expecting another record crop, traders and government officials saw an opportunity to export 12 million tonnes in the current 2022-23 fiscal year.

In mid-February, nearly a month before the recent hot spell, the government said India was on course to harvest an all-time high 111.32 million tonnes of the grain, up from the previous year’s 109.59 million tonnes

The government is yet to formally revise its production estimates, but an official note, seen by Reuters, said the output could fall to 105 million tonnes this year.

“Loss of production of wheat, all India basis, more or less stands around six per cent, on account of shrivelling of wheat grains around 20 per cent due to terminal heat and heat waves,” the note said.

In 2022, India recorded its warmest March in 122 years with the maximum temperature across the country rising to 33.1 C, nearly 1.86 C above normal, according to data compiled by the state-run India Meteorological Department.

“We’ve some initial idea but it’s a little early to fully understand the extent of crop loss,” said a senior government official who keeps tabs on planting and harvests.

He declined to be named as he’s not authorised to talk to the media.

At this stage, no one has a clear idea about the crop size, said Rajesh Paharia Jain, a New Delhi-based trader. “It’s a dynamic situation, so we will have to wait for a while to see a clearer picture,” Jain said.

Exports at risk

“Based on the production estimates issued by the government in February, we could have easily exported much more than 12 million tonnes, but it now looks like we’ll be exporting around 10 million tonnes,” he said.

Even with the warm weather, India’s wheat exports could easily cross last year’s shipments, the government official said.

Some traders are more pessimistic, projecting as much as a 10 per cent drop in output.

“Dwindling supplies in spot markets are indicating a bigger drop in the production. I think production could be down 10 per cent to around 100 million tonnes,” said the India head of global trading firm, who declined to be named.

The government could restrict exports if production sank come closer to such level, he said.

Addressing the Indian diaspora in Berlin, Indian Prime Minister Narendra Modi said currently many countries are struggling with a severe shortage of wheat.

“Big nations are worried about food security, and at this time India’s farmers are coming forward to feed the world,” Modi said.

Before the nearly 50 per cent surge in global wheat prices, those paid by the state-run Food Corporation of India (FCI) exceeded world prices, making exports unattractive.

Now, private traders are actively buying wheat from Indian farmers for exports.

So far this year, FCI’s wheat purchases are 38 per cent lower than the previous year, according to official data, indicating both higher purchases by private traders for exports and some drop in crop output as well.

Local prices have gone up by 15 per cent in some markets, said a Mumbai-based dealer with a foreign trading firm, in another potential sign of more buying for exports and tighter supply.

— Reporting for Reuters by Mayank Bhardwaj, Rajendra Jadhav and Neha Arora.

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The “heat dome,” a high-pressure system trapping warmer air, has affected British Columbia the most. The village of Lytton, about 160 km southwest of Kamloops, on Sunday reached a daytime high of 46.6 C, breaking the national record reported in Midale, Sask. in 1937.

In total, 60 heat records were broken in B.C. on Sunday and an evacuation order was made in Pemberton Valley because snowmelt contributed to rising river levels. Schools on Vancouver Island and the Lower Mainland cancelled in-person classes on June 28, while community centres and churches were opening up cooling stations.

The Lower Mainland may hit a high of 45 C on Monday, with the city of Abbotsford possibly reaching 50 C on the humidex. Kamloops is expecting six days above 40 C during the heat wave.

“This is headshaking for somebody like a climatologist, like myself. I mean, I like to break a record, but this is like shattering and pulverizing them,” Environment Canada senior climatologist David Phillips told CTV News on Saturday.

All of Alberta, most of B.C., central Saskatchewan and Flin Flon and The Pas in northwestern Manitoba are all under heat warnings from Environment Canada. All of the areas, except in Manitoba, are expected to either approach or exceed a high of 40 C.

The national weather agency advises people to watch out for the effects of extreme heat: swelling, rash, cramps, fainting, heat exhaustion, heat stroke and the worsening of some health conditions. The risks are greater for young children, pregnant women, older adults, people with chronic illnesses and people working or exercising outdoors.

If you or someone feels dizzy or disoriented, call 911 or your local emergency number.

— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.

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“Yesterday’s Crop Progress report provided plenty of fodder for the bulls,” Matt Zeller, director of market information at StoneX, said in a note to clients. “No change yet in hot and dry weather forecasts going forward.”

U.S. wheat futures were mixed, with winter wheat contracts rising on technical buying while spring wheat eased for a second day in a row after some rains in Canada.

Chicago Board of Trade July soybean futures settled up 19-3/4 cents at $15.80 a bushel and CBOT July corn was 3/4 cents higher at $6.80 (all figures US$).

Gains in new-crop corn futures, which track the crop currently being grown, outpaced the front-month contract as the predicted temperatures will stress the plants throughout key development phases.

“U.S. weather continues to be the major focus,” said Tobin Gorey, director of agricultural strategy at Commonwealth Bank of Australia. “Weather forecasters have the U.S. Midwest’s northwest on a path to an expanding area of dryness and crop stress over the next fortnight.”

The U.S. Department of Agriculture (USDA) on Monday afternoon rated 72 per cent of the U.S. corn crop in good-to-excellent condition in its weekly crop progress report, down four percentage points from a week ago and below the average of estimates in a Reuters poll.

USDA rated 67 per cent of the soybean crop as good-to-excellent in its first 2021 condition ratings for the oilseed, below the average analyst expectations of 70 per cent.

CBOT July soft red winter wheat was up five cents at $6.85. The contract found support at its 50-day moving average.

But MGEX spring wheat for July delivery was 13-3/4 cents lower at $7.71-1/4 on follow-through selling after sinking 3.4 per cent on Monday.

— Mark Weinraub is a Reuters commodities correspondent in Chicago; additional reporting by Naveen Thukral in Singapore and Sybille de La Hamaide in Paris.

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