Where’s The News?
Grain markets pushed through the month of May with a little more volatility under its belt as more volatile weather and geopolitical risk in Washington, D.C. is creating more uncertainty. Heading into the Canadian May long weekend, parts of Western Canada and U.S. Northern states were hit with sub-zero temperatures which shouldn’t affect the large, large majority of fields since they’ve just barely been planted (or not at all). In the U.S. though, the American farmer continues to plant a lot of grain very quickly, with the last U.S.D.A. progress report telling us that 26 million acres of corn got planted in the 2nd week of May (or around 1/3 of the total crop!). There’s an argument that because of some cooler temperatures over the next 2 weeks, there’s stronger possibility of the American corn crop pollinating in the 2nd half of July when it’s usually really hot (While there’s no proven correlation between colder temperatures in May and yield potential, hotter temperatures usually seen in July can have some impact). However, this is entirely speculative at this point and hard to dig into too deeply at this point and that’s what more people will try to do when there’s a lack of market-moving news.
One could argue that there are more bullish fundamentals in wheat than any other crop. Over the next 2 weeks, precipitation events are expected to be in strong supply across U.S. winter wheat growing regions, just at a time when harvest is set to begin. Oklahoma is already taking some crop off of and the Wheat Commission there says test weights have been solid around 63 – 65 pounds per bushel with yields ranging from lows 20 to 40 bushels an acre. Any rain falling on these crops that ready (or nearly ready) to be combined just won’t turn out well. Also, a bit bullish on wheat is U.S. wheat getting in on some of the action with the G.A.S.C., with 115,000 of HRW wheat being bought for a FOB-American port price of $185 USD / MT (or about $6.50 CAD / bushel). However, Egypt also bought from Russia, Ukraine, & Romania so it’s no clear conclusion that American wheat has any sort of competition edge over product from any other country.
Switching over to soybeans, tapes of the Brazilian President talking about bribing witnesses in a corruption scandal has led to the sell-off of the Brazilian Real after a week of continuous moves higher. The weaker Real will increase the domestic price of Brazilian soybeans, making it more attractive for farmers there to start unlocking some bin doors, which would intuitively take away from demand for U.S. supply. Nonetheless, from where I’m sitting, I’m a bit surprised that U.S. soybeans have been able to be this competitive with South American supply for this long. Also bearish for the soybeans complex is the April N.O.P.A. crush number for April which showed just 139.1 million bushels of beans getting used, well below the market’s pre-report expectations of 145.7 million bushels. This is the 3rd straight month that crush has run below what it was a year ago (and the worst “miss” of the season), putting total year crush volumes at just 0.8% over last year. To hit the U.S.D.A.’s total year crush forecast of 1.95 Billion bushels, crush volumes from May to August must be 4.6% above last year’s usage. While there continues to be buzz of Chinese buying American beans, this crush number, solid planting progress, and poor export inspections capped any bullish action in soybeans yesterday.
From a cash grain markets perspective, Western Canadian canola prices continue to remain elevated thanks to relatively consistent demand (both domestically and internationally) and concerns over delays in Plant 2017. As such, spot movement for the oilseed remains above $11.50 CAD / bushel across the Canadian Prairies and some specials above $12 available. Yellow peas prices continue to spread between $8 - $9 CAD / bushel for spot movement with about a 50 – 75 cent / bushel spread lower for new crop. Wheat continues to be plagued by slow demand but remains supported by futures values, meaning things are trading sideways to lower in most places with spot movement for CPS wheat trying to hold onto the $4.50 CAD / bushel handle while hard red spring wheat prices are about $2 / bushel higher. Without new demand creeping into the market and/or news to catalyze things (maybe other than weather?) it’s tough to say when the next time we’ll see the prices seen a few weeks ago in the Kansas Wheat Quality crop tour.
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