Tempered Spring Forward?
Grains are heading towards the end of March with a lot of eyes on the early spring most of the northern hemisphere is seeing (and the obvious itch to scratch dirt earlier than normal!). Wheat is leading the spring rally (if you want to call it that), thanks to freezing temperatures across most winter wheat growing states. As warmer day-time temperatures had reduced snow-cover and brought more than a few tillers out of dormancy, what we get is a killing freeze, albeit some speculators think that the bulls are over-optimistic that much of the crop is dead. While weather markets can often be led by wheat as indication for the rest of the complex, a spring rally may not be the massive 25%-like move that most are hoping for, but more of a tempered 5-10% upswing.
That being said, per the PDQ grain pricing website, durum and hard red spring wheat prices pulled back a bit over the past week thanks to a stronger Canadian Loonie. Canola prices have been able to keep their strength as a result of more soybean shorts being covered and higher palm oil prices, which intuitively supports soyoil prices, which, in turn, supports canola. As per the PDQ website, CPS wheat has weathered the storm this week thanks to the aforementioned concerns over the effect that colder temperatures are having on winter wheat crops in the U.S. Southern Plains. More colder weather looks to be on its way this coming weekend so you may see it in the green again in next week’s column!
The nation’s farm ministry, the A.A.F.C., is betting 20.9 million acres of the oilseed will get planted, not surprising given the likely pull back in wheat acres, of which 24 million acres of the cereal are expected to get planted. This would be a drop of about 2% year-over-year (some private estimates are as high as 5% lower) but with that sort of acreage, and the current export activity, this would put the 2016/17 Canadian wheat carryout at 3.7 million tonnes, or the lowest level since the 1960-61 marketing year. Obviously, the A.A.F.C. raised pulse area too, to 4.2 million acres of peas and 4.45 million acres of lentils (+14% and +13% from last year, respectively).
With soybean prices staying tempered, Allendale Brokers released their annual grower survey of intended U.S. planted acreage, and it’s no surprise that less soybeans are expected to go in. Down slightly from last year, 82.58 million acres are expected to get planted (U.S.D.A. at 82.5 million, Informa at 84 million), which, at trend-line yields, would suggest a crop of 3.72 Billion bushels. For corn, 90.43 million acres are expected to get planted according to the Allendale survey (U.S.D.A. at 90 million, Informa at 89.5 million), up 2.43 million from last year, and could produce a 13.6 Billion bushel crop. As for wheat, 51.77 million acres are estimated to get planted (equates to 2B bushels!), a drop year-over-year but still above the 51 million acres the U.S.D.A. or the 51.2 million acres Informa is speculating. Overall, the market sentiment suggests that any change in acres in the coming weeks will be tempered, but with Mother Nature playing her warmer hand sooner than later, the bulls do have more of spring in their step.
President & CEO | FarmLead.com