AGRICULTURE MONTHLY OVERVIEW MAY 2021
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AGRICULTURE MONTHLY OVERVIEW MAY 2021 Welcome to the Agriculture Monthly Overview, your comprehensive monthly resource to depict how weather forecast patterns and risk data will impact the growth, production, supply, and transportation within the food supply chain. Get in Front of What’s Ahead. For more information, visit Everstream.ai.
2 / MAY 2021 /
TABLE OF CONTENTS
HE AGRICULTURE MONTHLY OVERVIEW (AMO)04
1. T
2. SPECIAL GUEST COMMENTARY 06
3. TOP 5 WATCH LIST 10
4. THE MONTHLY DIVE 15
5. THE AMO GOAL 18
/ AGRICULTURE MONTHLY OVERVIEW / 3
THE AGRICULTURE MONTHLY
OVERVIEW (AMO)
May is the heart of the transition period, as crop This month’s AMO will feature a new section
cycles shift from the Southern Hemisphere to the – a special guest commentary! Kenneth Scott
Northern Hemisphere. In the Southern Hemisphere, Zuckerberg, Lead Analyst and Sector Strategist
the 2020/2021 growing season is done in most responsible for grains, farm supply, and ethanol
areas, crops are being harvested, and production sectors at CoBank, will discuss the recent run in
is being assessed. In the Northern Hemisphere, grain prices. Then we will provide an update of
summer crops are being planted and the “new precipitation during the past 30 days on a global
crop” growing season is starting up. The focus basis. Our Top 5 Watch List will provide a quick guide
of attention during the next 5-6 months will be to the items that we believe are most interesting,
growing conditions in the major producing areas in important and/or at highest risk of becoming the
the Northern Hemisphere – U.S., Europe, the Black next big issue. Finally, the Monthly Dive will take an
Sea, China, and India. in-depth look at the Indian monsoon – one of the
Figure 1: Goldman Sachs Commodity Index from May 2016 – May 2021; Source: GSCI
4 / MAY 2021 /
most unique and crucial atmospheric
phenomena in global agricultural.
The purpose of this report is to give
a general synopsis of agriculture
at a high level. Unlike our daily
Agriculture Digest, this report is
meant to provide a broad overview
of important and interesting things
going on around the world in
agriculture, food, and all the sectors
that are interwoven within the “food
supply chain web.”
/ AGRICULTURE MONTHLY OVERVIEW / 5
SPECIAL GUEST COMMENTARY
This month’s special guest is Kenneth Scott Fast forward to the present, and here’s the
Zuckerberg, Lead Analyst and Sector Strategist current state of play:
responsible for grains, farm supply, and ethanol • Corn and soybean prices have basically doubled
sectors at CoBank. Ken is based in metro New prior to recent price corrections off peak levels;
York. His breadth and depth of knowledge in the
• China continues to make record “flash sale”
agriculture business is unmatched. We are honored
purchases of U.S. grain;
to have Ken as our guest commentator.
• U.S. inflation has surged (at least temporarily),
with food, energy, housing and used car prices
What a Difference a Year Makes seeing strong upward moves;
In May 2020, corn was priced near $3.50 per • Latin American crop production estimates been
bushel and market expectations for a large crop reduced although the situation is fluid; and
had several parties predicting that #2 yellow U.S.
• While U.S. crop progress is off to a very good
corn might see $3.00 during the summer of 2020.
start, drought continues across many parts of North
Then things changed. First, China began buying
America, Canada and Mexico.
large quantities of corn, wheat and sorghum (in
addition to soybeans) leveraging its strong currency
advantage (relative to the U.S. dollar) to offset
high prices on the Dalian Commodity Exchange.
Second, financial market investors began buying
commodities en masse (agriculture, energy, metals,
etc.) to hedge against inflation in advance of a
post-COVID economic recovery. Third, adverse
weather reduced U.S. crop production and the
global effects of La Niña and drought conditions
raised concerns about production from other major
growing regions, namely Argentina, Brazil and the
Black Sea region. Kenneth Scott Zuckerberg, Lead Analyst and
Sector Strategist at CoBank
6 / MAY 2021 /
/ AGRICULTURE MONTHLY OVERVIEW / 7
8 / MAY 2021 /
The proverbial “$64 million question” is from 91 million towards 95 million—when USDA
where do prices go from here? updates the estimates originally provided during
I see grain prices remaining volatile but likely range its March planting intention survey. Weather,
bound over the near-term due to several cross as always, will factor into the direction of grain
currents. On the one hand, continued demand by prices; however, the major X-factor we see and are
China and U.S. biofuel producers and tight stocks vigilantly monitoring is yet another active Atlantic
(i.e., low stocks-to-use ratios) are supportive for hurricane season, as predicted by NOAA and
grain prices. On the other hand, U.S. corn planted Everstream Analytics. I guess the summer will not
acres will likely see a material upward revision— be as relaxing as I expected it to be?!
/ AGRICULTURE MONTHLY OVERVIEW / 9TOP 5 WATCH LIST
Our Top 5 Watch List includes the latest items that 1. U.S. - Western U.S. Drought
are pertinent to monitor or have the highest risk to 2. Pacific SSTs
impact agriculture, and inevitably, the agriculture
3. Indian Monsoon
global supply chain. Hence, these are the top items
or areas that need to be monitored which could 4. Mexico Drought
lead to impacts in the agriculture supply chain (crop 5. Europe/Russia Dryness
losses via heat/drought/wetness, logistic issues,
and miscellaneous issues).
Figure 2: Top 5 Watch List Areas Highlighted on a Map from Nextgen; Source: Everstream Analytics
10 / MAY 2021 /1 U.S. - Western U.S. Drought 3 Indian Monsoon
The historic western U.S. drought remains the The summer monsoon rainy season is vital to
top item to watch closely going into the heart of India’s economy. June is the first month of the
the Northern Hemisphere summer crop growing summer monsoon rainy season across the Indian
season. During the past month, there have been subcontinent. With global agriculture sensitivities
no major changes in the extent and magnitude of and the continued COVID crisis across India, the
the drought, with the most severe conditions still timing, location, and intensity of rainfall during
centered over the Desert Southwest. Minor changes the monsoon onset will be closely watched.
that we have observed include improvement in There are some indications for an erratic start to
portions of the Plains including Texas but expansion monsoon rains next month, especially across the
across the northern Rockies. Additionally, pockets southern half of the country. As a result, the start
of drought have surfaced across the northern and to the Indian summer monsoon rainy season has
eastern U.S. due to recent dryness. been added to our Watch List. In our Monthly Dive
The primary feature to focus on is any future section, we discuss more details about the Indian
expansion of the western U.S. drought into the monsoon, rainfall trends in recent seasons, and the
more concentrated agriculture region in the central SST signatures that will be driving rainfall patterns
U.S. However, another feature to watch closely is this summer.
any expansion of the dry pockets in the northern
and eastern U.S. Furthermore, dryness breeds heat, 4 Mexico Drought
and the larger spatial extent of drought enhances
heat risk, especially for the West. Drought remains across Mexico; however,
there has been some improvement since April,
especially across the southern portion of Mexico.
2 Pacific SSTs The improvement in rain across southern Mexico
Trends in sea surface temperatures (SSTs) across the has been a result of the start of the monsoon rainy
equatorial and North Pacific remain on our Watch season across Central America. The monsoon will
List. A lingering cool bias of waters in the equatorial continue to advance northward across Mexico
regions (neutral to weak La Niña conditions) along through late May and June. If upcoming rainfall
with the cooler than normal SSTs off the West Coast across northern Mexico is like what has occurred
of the U.S. and Canada continue to increase the in southern Mexico in recent weeks, then there will
odds of heat and dryness in agriculture belts and be additional improvement in drought conditions.
livestock areas within the western portions of the Again, Mexico is a breeding ground for the buildup
U.S. and Canada. of heat during spring. The lingering drought
/ AGRICULTURE MONTHLY OVERVIEW / 1112 / MAY 2021 /
equates to an enhanced heat risk across Mexico development. Concurrently, dryness has expanded
and adjacent areas such as the U.S. late May and across portions of far southern Europe, especially
June. the southeast countries. Additionally, central Russia
has shifted dry with unusual spring heat developing
across parts of Russia in recent weeks; temps
5 Europe/Russia Dryness reached 30°C/86°F as far north as the Arctic Circle
Last month’s Watch List included western Europe on May 19. This dryness and spring heat are items
which had a very dry April. May has turned more to monitor for newly planted crops within these
active across western Europe, improving soil areas. The longer it persists, the more it depletes
moisture and favoring winter and summer crop soil moisture which then increases crop stress.
Figure 3: Percent of Normal Precip Last 30 Days (April 19 – May 19, 2021); Source: ERA5
/ AGRICULTURE MONTHLY OVERVIEW / 1314 / MAY 2021 /
THE MONTHLY DIVE
This month’s topic dives into details of the Indian depend heavily on rain from the monsoon and can
monsoon, India’s critical summer rainy season which experience significant issues if the monsoonal rains
helps drive their economy. The Indian monsoon is do not live up to expectations. According to IHS
an oscillating, atmospheric phenomena that begins Markit, agriculture accounts for 14% of India’s $2.7
across the Indian subcontinent during June and trillion economy and provides 42% of total jobs.
ends in September. The monsoon brings about Given the importance, it is pertinent to understand
large-scale, atmospheric factors that are favorable past performance of the Indian monsoon and
for heavy rain and accounts for 80% of India’s expectations for the 2021 season.
annual rainfall. India’s crop and livestock sectors
Figure 4: Map of India from Nextgen Source: Everstream Analytics
/ AGRICULTURE MONTHLY OVERVIEW / 15Over the last 10 years, there has been a mixture of
above normal and below normal monsoon years.
Figures 5 and 6 below depict the percent of normal
precipitation during the monsoon season (June
– September) over the last 10 years across the
northern and southern halves of India. In general,
the monsoon does not significantly vary by latitude
across India (i.e., if it is wet across the south, it is wet
across the north). What does vary is the magnitude
of the above or below normal precipitation. The
last two years have brought an overperforming
monsoon while most of the years during 2012 –
Figure 6: Percent of Normal Precipitation June - September
2018 underperformed.
(2010-2020) for Southern Half of India; Source: ERA5
Turning to the forecast, we are predicting a near
normal Indian monsoon during 2021. However, the are two main factors that impact the monsoon:
risk is on the drier side versus wetter side. There equatorial Pacific SSTs and Indian Ocean SSTs.
In general, cooler than normal/near normal SSTs
across the equatorial Pacific lead to a near/slightly
above normal monsoon. Computer models predict
that SSTs will likely stay cooler than normal/near
normal through late summer and early fall. As
for the Indian Ocean, currently SSTs across the
western portion are cooler than normal and across
the eastern portion SSTs are warmer than normal.
Historically, the current SST setup in the Indian
ocean has led to a near/slightly below normal
monsoon. Computer models suggest this SST
setup will likely persist through late summer and
Figure 5: Percent of Normal Precipitation June - September early fall. When combining the two large-scale
(2010-2020) for Northern Half of India; Source: ERA5 drivers, we are initially predicting a near normal
Indian monsoon season during 2021.
16 / MAY 2021 /Figure 7: Sea Surface Temperature Anomalies 22 May, 2021; Source: NCEP
/ AGRICULTURE MONTHLY OVERVIEW / 17THE AMO GOAL The AMO is designed to provide an overview of important items in global agriculture. The core of agriculture (what we produce, what we do with what we produce, how we transport it, and how we and animals consume it) is always important. The current dynamics are unique (commodity price spike, recent extreme weather events and elevated risk in the future) and make the remainder of this year even more critically important to individuals and companies that have an interest in crops, food and the steps in getting food from farm to table. This report will be issued monthly and highlight items that are driving the agricultural global supply chain in this dynamic year. For more information, visit our website at www.everstream.ai. 18 / MAY 2021 /
/ AGRICULTURE MONTHLY OVERVIEW / 19
THINK BIGGER | SEE FURTHER | ACT SOONER WITH PREDICTIVE SUPPLY CHAIN RISK ANALYTICS Actionable insights to enable greater resilience and agility About Everstream Analytics Everstream Analytics is a supply chain risk analytics company that delivers actionable insights to increase the resilience and agility of our clients’ supply chains, protecting revenue and reputation. Our solution integrates with our clients’ Procurement, Logistics and Business Continuity platforms to deliver global, end-to-end visibility to supply chain risk to enable our clients to Think Bigger. We employ a unique combination of human expertise, artificial intelligence and proprietary data to deliver predictive insights to enable our clients to See Further. We combine data science, proprietary intelligence and multilingual specialists to monitor global risk and events in real-time to enable our clients to Act Sooner. We embed risk analytics into decision making during planning and execution across all functions and phases of our clients’ supply chains to help them Get in Front of What’s Ahead and turn risk into a competitive advantage. GET IN TOUCH Website Email Phone www.everstream.ai info@everstream.ai +1 (800) 261 7947 Get in Front of What’s Ahead. For more information, visit Everstream.ai.
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