Louise Gartner: Wheat weather is crucial
This time of year the market tends to shift its focus to weather, and this is definitely one of those years. Indeed, weather has been an issue since last fall when much of the western central and southern plains winter wheat was planted into very dry conditions, germination and emergence was paltry at best and winter offered no relief from the harsh conditions.
As winter wheat broke dormancy in the Panhandles, there was little if any improvement in moisture conditions. Now as Kansas tries to green up, the continued lack of moisture in the western plains is forcing the market to pay much closer attention. Crop conditions for the western and southern plains are bordering on terrible and aren’t going to get any better without the rains. Texas winter wheat conditions are rated 56% poor/very poor, the worst in 44 years. Oklahoma isn’t much better at 43% poor/very poor, with Kansas sitting at 37% poor/very poor. Wheat may have nine lives, but it’s using them up fast without the rains.
The sudden change in the forecast on Wednesday for two rain systems to move across the western plains brought out the bears who tried to press the market lower. But at this time of year, just a forecast won’t break the market; we need to see the rain actually fall - which it failed to do. By the time Thursday was finished, wheat had regained those small losses and was working back up to the swing highs from last Friday.
For most regions, the growing season is just beginning and weather is already a huge factor. If the rains do not materialize soon for the western plains, wheat could easily have more rally power in it. The seasonal tendency is for wheat to build a weather premium through much of April. I think it’s worth noting that some of that usual weather premium includes frost, which hasn’t even been mentioned yet.
The question is, how much more rally power could wheat have. A disaster in the western plains of the US should be enough to rally wheat back to the congestion price range of late Feb/early March, but I don’t think it could get back to the highs of early Feb. That said, if a notable problem develops elsewhere in the Northern Hemisphere, then I think we could see prices have much more power and at least get back to those highs. That other problem might even be here in our own northern plains and Midwest (we’d have to include the Canadian prairies as well) where continued cold, snow and rains are setting the stage for another spring with planting delays.
As we look around the Northern Hemisphere, the area that jumps onto the radar is still the southern Russia region that was at the heart of the massive drought last year. They did not had enough moisture last fall or through the winter to relieve their dry conditions. Winter wheat plantings were down last fall but they do expect spring grain plantings to fill those acres. This is a very important region for Russian grain production and the market is watching it closely.