Good Weather Reins in the Bulls — The Markets This Week


The grains complex ended the week on the up and up thanks to weather concerns, strong international purchasing, and the Kansas crop tour showing fields that came in below expectations. The oilseed complex was boosted by soybean oil and meal technicals, labour issues in South America, and Chinese buying. On the wheat side, Egypt bought some product at its cheapest price in years from Russia. Ultimately though, the speed, efficiency and good planting conditions of #plant15 is still reining in any bulls trying to get out of the pen.

The Kansas Wheat Quality Tour this week showed that average yields and production in American’s largest wheat producing state will rebound from last year’s poor crop. Crop tour participants pegged yields at 35.9/bu, equating to 288.5-million-bushel crop. While still below the long-term average of 40.3 bu/ac and 313.6 million bushels, it’s a marked improvement from 2014’s 28 bu/ac and 249 million bushels.

Neighbouring Oklahoma is in the same boat as Kansas, with this year’s winter wheat crop expected to average 29.4 bu/ac for 111.7 million bushels, topping last year’s final of 17 bu/ac for just 47.6 million bushels taken off. Should dry conditions persist in the U.S. Southern Plains we should expect total production numbers to fall come harvest time just like they did last year.

According to a few grain handlers, Argentinian farmers are stepping up their marketing game as soybeans are being delivered regularly to port positions. As Argentina has become the price leader for soymeal, processors are running on all cylinders. Between this demand, the continued depreciation of the Argentinian peso, and farm debt levels remaining elevated, more sales of this year’s record crop are expected soon. There are some suggestions that this could come in the fall with a new Argentinian government in place after the October elections. Interestingly enough, this would coincide with the start of the seeding season for South America so Argentinian farmers would have cash on hand from their sales to buy crop inputs (food for thought: because of Argentina’s rate of annual inflation running at almost 30%, the relative cash value of selling those beans in the fall versus now would be worth 10-15% more!

Conversely, on-farm storage continues to grow in North America, producers on this side of the equator are able to hold on to their crop a little bit longer. Some ethanol makers are expecting more sales to be made throughout the summer than normal as farmers need to make space for the nearing harvest. From this and looking at historical price patterns over the course of the last couple decades, we could easily expect an early start to the seasonal/harvest downward price pressures (assuming that weather conditions remain decent) as bin space needs to be made.

The Midwest and Southern Plains have been getting some rain this week, but some of it via violent weather than included tornadoes and crop-flattening winds. The rains in some parts will likely slow down the seeding pace but accelerate risks of disease spreading on wheat and early planted corn. Adding to the melee is cold temperatures this morning (below zero in many places), causing problems for more of the developed winter wheat crops and heading further north, the crops that are just starting to peek out of the ground.

On that note, seeding continues in Western Canada with all Canadian Prairie provinces ahead of their 5-year averages, matching their counterparts across the border in northern U.S. states that are also ahead of schedule. Seeding estimates range from 25 to 40 per cent complete with areas in the southern regions of the Prairie provinces 100% complete. That being said, freezing temperatures late in the week, and forecast for the weekend means that percentage could technically be lower than what officials are saying if reseeding is needed (which is likely).

Some other industries are reseeding their own strategies as a newly-elected NDP majority government in Alberta looks to tighten up the wallet a bit on the business side of things, already admitting plans for the corporate tax being increased from 10% to 12%. Seeing your tax bill go up 20% overnight isn’t necessarily a friendly environment for any operation. Much like the grains market, the fundamentals are keeping the bulls at bay.


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