Grain prices started falling back this week as moisture finally hit some areas of Western Canada and reported decent conditions of already-planted crops in the Midwest. There are, however, a significant amount of soybean acres that still have not been planted in major states like Missouri, Illinois, and Iowa because of persistent wet conditions. Ultimately, weather and a strengthened U.S. dollar (because of Greece’s credit default risk) are pulling the reins on any mid-June rallies.

This pull back doesn’t really apply to canola, though, as lower expectations in Western Canada, plus the higher U.S. dollar helped push canola above the significant level of $500/tonne, validating our call in May 2014 that we wouldn’t see $500/tonne canola for at least another year.

Looking forward to the June 30th planted acreage report in a two weeks, we’ll see how many of those 11 million acres of soybeans yet to go in actually get seeded. Specifically for Missouri, the prevent plant deadline is this Saturday, June 20th, and maybe there’s a few farmers who are just waiting for the weekend.

The market is starting to understand the dynamic of this sort of acreage loss, which is the biggest reason why we saw a bit of a rally Friday mornig in soybeans, which are up 40 cents from their lows on Sunday night and the highest in the last month. Also given the bigger short position that managed money had built up in the last few weeks, we may see some short-covering strength as those hedge fund players get out of their bearish bets with their smart money.

Egypt, the world’s largest wheat buyer, says that they have enough supplies to last them through to January, 2016, thanks to some recent purchases from Russia and Romania. Over the course of the past six months though, France has gotten a fair amount of business from Egypt, shipping out 1.95 million tonnes, which is a 182% increase year-over-year. Accordingly, FranceAgriMer (basically France’s USDA), dropped its 2014/15 wheat carryout number to three million tonnes from its 4.4 million-tonne expectation back in October. Further, they upped their total wheat exports to 21.3 million tonnes, making it the fourth biggest exporter of wheat, only behind the Americans, the Ruskies, and the Canucks (us, eh).

Further down that list is Australia, who is expecting to see their wheat exports drop in 2015/16 to 16.5 million tonnes mostly due to lower acres and production as a result of drier El Nino conditions. ABARES. (the Aussie U.S.D.A.) is also expecting canola exports from the Land Down Undaa to fall 11.3 per cent year-over-year to 2.18 million tonnes, the third straight decline since the record 3.5 million tonnes shipped out in 2012/13. On that note, Australia is getting some “useful” rain ahead of expected dry El Nino-like weather. As such, the market is pricing some of these drier spots into the wheat space, but again, you can expect prices to be suppressed back to down rather quickly should any significant moisture be seen (for the record, wheat is a weed!).

Agriculture and Agri-Food Canada says that Canadian lentil prices will maintain their strength this year with “smaller discounts for lower grades” thanks to strong Indian demand. That being said, a decent start to the Indian monsoon season and good rains in Australia means better crop production prospects. Specifically in the Land Down Undaa, 70% of chickpea acres are seen having adequate moisture to help get them through to the winter moves. Of course, the chances of an El Nino event bringing drier weather to the Southeast Asian region remaining high, there should be some price volatility that would allow for one to sell into rallies.

Although most science is pointing to warm waters in the Pacific bringing on an El Nino event with wetter conditions in the U.S. Midwest, it is weather from the East Coast – Tropical Storm Bill – that’s actually creating headaches for farmers from the Delta up through the Midwest. With all the wet weather, Chris Narayanan of Societe Generale says there’s more some acres won’t get planted this year, but the bigger effect will be the number of acres that don’t get harvested thanks to higher abandonment rates. However, there is the chance that with the significant amount of moisture falling on fields that yields could turn out higher than expected.

On that note, it can be a little tough to look out over some fields in drier parts of Western Canada and still see prices on the general market not increasing. The unfortunate reality is, rain in other places is literally raining on any price parades, as spring-planted crops in the U.S. and Europe all look pretty good at this time. On that note, we continue to recommend selling set 10-20% blocks of grain still in the bin, or even new crop production (if you’re comfortable with that) into these rallies versus just having expectations that they’ll continue to go higher.

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