Prices for wheat, corn, soybeans and canola all declined on Tuesday following the release of the USDA’s February supply/demand report.
“(The report) confirmed what the markets were thinking,” says Neil Townsend, director of market research with CWB in the interview posted below. “U.S. numbers were pretty firm — they’re not going to change the production at this time of year, so really the only big production numbers they were going to look at were South America…it was more a confirmation of the overall big picture that there are quite a bit of grains and oilseeds out there.”
Both U.S. and global wheat ending stock estimates were raised above the average trade guess prior to the report. World wheat ending stocks were bumped up to 197.9 million tonnes — analysts were expecting just under 196 million.
“Big crops get bigger,” says Townsend. “They’re finding a bit more wheat in the southern hemisphere and in places like Kazakhstan — not to be totally unexpected at this time of year.”
Although he thinks wheat values could find support from weather concerns heading into spring: “People are going to shift their attention to the coming crop and one area that’s of concern is the hard red winter areas of the U.S. are dry…I think we’re probably due to see a bit of risk premium for wheat continue to be in the market and keep it elevated for the next month and a half here while the weather sorts itself out.”
Townsend also discusses the soybean harvest in South America and the possibility of a growing disconnect between canola and soybean values: