Market Wrap Up: Dry Weather in the US Wheat Belt, AAFC Acreage Predictions & Geopolitical Wrangling

If you cannot see the embedded player, click here.

The week that was saw some more gains earlier in the week reined in Thursday and Friday as trading focused on logistical issues, dry weather in parts of the U.S, Eastern Europe and  Australia. The situation between Russia and Ukraine (and every other nation for that matter) is still weighing on markets as well.

Strong demand both domestically and internationally helped push soybeans up above $14/bushel but then the bulls were quickly abated by bearish pressures from China cancelling more orders and even selling some Brazilian supply back to the American buyers. This is because U.S. supplies are approaching critical levels and more than a few analysts are predicting that the U.S. will import a record number of soybean numbers this year.

Canadian logistical concerns haven’t been forgotten about though and there are some new pressures on the table labour disputes between container truck drivers and the Metro Port of Vancouver and CN Railway and its union workers are adding fresh pessimism to grain movement improving. Adding to the mess, record levels of ice seen on the Great Lakes this winter is taking longer to thaw and, as such, the Port of Thunder Bay will open at least a week later than usual this spring, likely sometime during the first week of April. The ice is still about 1.2 metres thick (four feet), about foot thicker than normal. The Port of Thunder Bay’s C.E.O., Tim Heney expects their facilities to be busy this spring to help ease the backlog. Of course, we could just do what the Chinese did last week on the Yellow River and drop bombs on the ice to help break it up faster…but I digress.

Dry conditions in the U.S winter wheat belt are starting to a put a serious negative outlook on the crop, and intuitively pushed prices up when the crop ratings report was put out by the U.S.D.A. on Monday. Kansas City (hard red winter wheat) and Minneapolis (hard red spring wheat) futures both enjoyed the early-week pop and held onto some of their gains through Friday’s close. From a condition standpoint, 34 per cent of Kansas winter wheat, 18 per cent of Oklahoma crop, & just 13 per cent of fields in Texas were rated as good-to-excellent. Further, the portion of the crop rated poor-to-very poor continues to increase as much of the region is experiencing very dry topsoil conditions (55 per cent in Kansas was short-to-very short moisture, 75 per cent in Oklahoma, and 73 per cent in Texas). Speaking of dry, soil moisture in Eastern Europe is also getting some notice from investors as in regions like Poland, Estonia, Romania, & the Ukraine are feeling the effects of a warm winter that didn’t bring a ton of snow cover. While Plant 2014 is starting to hit full tilt across the Atlantic, the significant rains that the region saw in the fall has been a saving grace for those fields hurting for moisture.

Despite the geopolitical situation keeping things on edge, Ukraine still shipped over 700,000 tonnes of grain last week, most of it corn. However, just on Friday, March 20th, the USDA announced that Egypt had bought 340,000 tonnes of corn from the U.S. Why is this significant? Egypt buys a lot of its corn from Ukraine, and thus, this could be taken as an indicator that while the movement of grain is still feasible in Ukraine, less international buyers are interested in doing future business there. This in mind, because of the increased cost of doing business in Ukraine, crop inputs (i.e. seed, fertilizer, & fuel) may be more expensive for farmers there to source. Thus, it’s been suggested that up to 20% of Ukraine’s arable land may go unseeded this year, leading to a production drop by as much as 11 million tonnes (they produced a record 63 million tonnes last year).

Speaking of seeding, Agriculture & Agri-Food Canada says that planted acres here in the Great White North will fall just 309,000 acres from last year’s seeded land for a total of 66.1 million acres of land being turned over. The government agency also sees pulse crop acres growing substantially with pea acres increasing 10 per cent year-over-year to 3.71 million acres while land planted with lentils are seen growing almost 14 per cent to 2.72 million tonnes. The biggest issue though, the AAFC pointed out, will be the carryover of grain inventories into 2014/15 thanks to the record crop taking off last fall.

Wake up with RealAgriculture

Subscribe to our daily newsletters to keep you up-to-date with our latest coverage every morning.

Wake up with RealAgriculture