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Wheat markets drifted mostly lower this week, unable to regain any upward momentum after last week’s sharp break. Minneapolis spring wheat did manage to gain a few cents as the drought across the north intensified, but was generally held in check by rains that popped up in the eastern Dakota’s late in the week.
That drought, present since spring, is also expanding deeper into the Canadian Prairies and taking a toll on spring crops across much of southern Alberta and Saskatchewan. Alberta is reporting that spring crop conditions dropped 6% from last week to 65% good/excellent; spring wheat was rated 66% good/excellent, down 5%.
Here in the US, spring wheat crop conditions continued in their record setting path of only 33% good/excellent, down 1% from last week; poor/very poor was at 41%, up 2 points. North Dakota sits at a dismal 32% G/E, down 4, and P/VP was up 5 at 40%
While the market is well aware of the disaster unfolding across the northern and central plains, it is now much more focused on the potential for that disaster to move into the western Midwest. The hot and dry conditions are indeed creeping into that region, but pop-up rain storms through Iowa and Illinois this week kept the market in check.
Nevertheless, US crop conditions are expected to decline again after last week’s 1% drop in good/excellent for both corn and soybeans. Iowa took the biggest hit with a 6% drop in corn and 4% drop in soybeans. Iowa is in the path of the expanding drought; in fact, they’ve been seeing much below average rainfall since early June. So, needless to say the rains this week were huge in holding off further crop damage – in the areas that got rain.
However, with pollination underway for corn and just around the corner for soybeans, the heat and limited rain is further stressing crops as farmers report deteriorating conditions. Private analysts are already shaving yields in corn and soybeans, and are prepared to shave even more if generalized rains don’t come soon, particularly in the western Midwest.
The longer-range forecasts still call for heat and dryness to expand from the plains deeper into the Midwest, but price action this week for the row crops was choppy. An early week attempt to resume a rally stalled. Corn gave up much of that rally, while soybeans managed to hold much of its gains.
Price direction for wheat still hinges basically on spring wheat and corn. Spring wheat has a big job ahead as it tries to buy back acres against potentially higher corn and soybean price levels. While we’ll likely get some price pressure in spring wheat during harvest, which will be early this year, it is just as likely that prices will resume upward into the spring as planting decisions are made.
Egypt was back in the market this week, buying 300 TMT from Russia, Romania and France. Prices were similar to last week but freight rates were stronger.
Europe is moving through its harvest season, with France about 65% completed. While not a stellar crop for them this year, at least it’s much better than last year’s disaster, with production estimates at about 37 MMT, up 33% over last season. The weather in Eastern Ukraine into Southern Russia has trended warm and dry, and reports show increasing crop stress in that region. But with winter wheat harvest underway, the impact on wheat is more limited than on the spring crops.
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