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GMO wheat infiltrates supplies
The big news this week was, of course, the discovery of GMO western white wheat in Oregon. This opens up a whole range of questions. The first one: How did this happen?
Proponents of GMOs say there’s no need to worry about food safety. Opponents of GMOs say it was only a matter of time before something like this happened.
And as we discover that not only are the regulations of GMO experimental supplies inadequate but also the enforcement was lacking, it makes the situation all the more concerning. With field trials ending in 2004, the fact that experimental strains have entered the supply chain is unnerving to say the least.
No surprise, some of our customers have already slammed the door shut with Japan canceling a tender and suspending further purchases of western white and feed wheat. South Korea is also suspending U.S. wheat purchases until the government can test all cargoes. Other major buyers are either ‘monitoring’ the situation or now requiring that all shipments be tested for GMO traces.
Obviously, this is a serious matter, and the U.S. is trying to quickly reassure our customers while also trying to answer the many questions surrounding the situation. This will be primarily a cash market issue, as western white wheat does not have an actively traded futures market. Fortunately, the futures markets for the other wheats largely brushed off the issue. Bids in the spot cash markets at the PNW for white wheat appeared to be pulled and deferreds were somewhat weaker. As long as we don’t find any more tainted wheat, it would appear that the major wheat markets should be OK.
Harvest is rolling in the South, even if we don’t hear much about it. Yields are terrible, but that’s no surprise. The presumption is that yields in the eastern half of the Plains will offset much of the losses in the western half. That’s a tall order, but clearly the market just isn’t concerned about hard red winter wheat supplies.
Wheat prices continue to closely track corn prices. Last week saw a surge in corn values, which quickly prompted a surge in wheat purchases by cattle feeders in the Southwest. As long as corn holds together, wheat will, too.
However, the outlook for corn is far from certain. With prevent plant dates upon us, there could be significant acreage shifts if Mother Nature keeps farmers out of the fields much longer. Heavy rains through the week will make for some seriously delayed plantings, opening the doors wide for yield risk through the summer heat. Time will tell – and we won’t have to wait long. There is a growing list of weather forecasters suggesting lots of heat this summer, so it could be a wild ride again this summer in the row crops – which will certainly impact wheat prices as well.
Exports continue to impress with another week of larger than expected sales. China’s purchase of 180,000 was accounted for and Brazil continues to buy with another 278,000 taken last week.
Quality is the key, and the U.S. and Canada have the stocks. As we move into early June, the seasonal tendency is for spring wheat cash/basis to peak and then head down into harvest. With the recent rains across the northern Plains, prospects for a good spring wheat crop have improved dramatically. It also suggests that the seasonal will follow the normal pattern as well, so booking spring wheat sales seems a prudent move as we head into early June.
I’ve returned from a trip to the Ukraine, visiting the city of Odessa and small villages to the northeast. The wheat and barley crops were fully headed out and already turning. The crops looked very good near Odessa, but the farther inland we went, the thinner the stands and shorter the wheat. The soils were very dry, and the warm winds weren’t helping. This region is on the far western fringe of the dry pocket of the Black Sea that runs from eastern Ukraine through the Southern Region of Russia into western Kazakhstan. This week, it looks like that dry region of the Black Sea finally received at least some light rains that should stem further deterioration at least for now.
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