Crop forecasts get shaved-Louise Gartner
Grain markets surged higher last week, completely regaining their losses from two weeks ago. It seemed like the market finally keyed in on the production losses in Europe; and coupled with the increasing production losses here in the US for wheat and corn, and even possibly soybeans, buyers were much more aggressive than they’ve been recently.
Chicago wheat gained almost 16% last week, the large percentage gain in over 3 years. Kansas City was up 8 % and Minneapolis up 9%. Corn was 12% higher for the week with soybeans up 3%.
While corn and wheat have their own bullish fundamentals, they’re also feeding off of each other. With so much wheat moving into the feed channels, any loss of corn production could be translated into higher wheat usage. The Southeast Asian markets have made significant switches to feed wheat, and it looks like the dry weather in China will force them to be much larger importers of both corn and feed wheat this marketing year.
Quality wheat, on the other hand, is also finding a surge in buying interest as farmers have virtually shut off sales while they wait to see if they’ll even get this year’s spring wheat crop planted. Basis values for high protein spring wheat soared last week in Minneapolis to their highest level since 2008. It looks like the early June time window for high quality wheat to peak is still on target. Of course, if spring wheat plantings remain stalled, which it looks like could actually be the case, we could be in for another year of very strong protein premiums.
North Dakota is projected to see a big drop in wheat plantings because of the wet weather, with farmers opting to plant shorter season soybeans or sunflowers instead. Eastern Montana and the southeast Canadian Prairies have had almost zero field activity and we could be looking at preventive plantings in those regions. The eastern Midwest isn’t much better off with persistent rains keeping farmers out of the field as well. The trade is expecting to see as much as 5 million acres of crops lost this spring – most of that to preventive planting but also some to flooding.
In sharp contrast to the flooding, the drought in the southern plains intensified according the US Drought Monitor. Ironically, as harvest gets rolling in Texas and Oklahoma on what little crop there is to cut – the rains are now coming. There were as much as three inches of rain in areas of Oklahoma where harvesters were ready to go. After months of nothing but dryness, now the rains come when they least need it. It’s almost insulting.