Severe drought in North America has cut expected US spring wheat output to the lowest in three decades and crops in the Canadian Prairies are likely to be reduced as well.

Large portions of Canada’s annual wheat and canola output are reserved for exports, with China being one of the main customers.

The USDA has pegged the US spring crop output down by 37% from the previous three-year average, the lowest since 1988.

US durum wheat harvest is expected at 46% less than last year and the smallest in 60 years.

Though the USDA has yet to update Canadian wheat output projections, a situation akin to 1988 would place the figure at 19.8 MMT, down by 11.7 MMT.

The loss in wheat and canola production would be significant to the global market as Canada accounts for two-thirds of global canola exports and is the third largest wheat exporter in the world, making up 13% of annual trade.

The first nine months of 2021 saw China become a significant customer of Canadian wheat, but as the situation worsens trade flows are likely to change.