Wheat poised for global weather rally
Wheat markets broke out of their doldrums and surged higher last week. Weather has been much of the grain markets’ story all winter and it looks like it will remain center stage as the Northern Hemisphere begins its growing season.
Warm and windy conditions across the US southwest are bringing wheat quickly out of dormancy, a little too early for the more northern areas where cold temperatures could easily return.
Dryness has been a problem throughout the winter for the western half of the southern and central plains, particularly the panhandle areas and southwest Kansas. The dry winds are sapping what little moisture they had and now are taking it from the wetter eastern half as well. As a result, Kansas City saw strong buying interest on Friday.
Minneapolis has emerged from the bottom of the pile to find significant buying as well. The dry northern Plains did get some moisture early last week, but concerns still remain as warm temperatures will likely rob much of that moisture. And of course, the Canadian prairies remain mostly dry as well.
It’s not just weather here in the US grabbing headlines. We’re hearing much more chatter about the expanding dryness in China – over the North China Plain (corn and winter wheat areas) and also the northeast (corn and spring wheat). A weak monsoon failed to deliver the usual rainfall to the headwaters of several major rivers that feed Southeast Asia, a major source of irrigation water. It’s important to remember that about 90% of China’s winter wheat is irrigated.
Not to belabor the weather point, but France was ratcheting up their estimates of grain damage from the cold snap that converged across Eastern and Western Europe in late Jan/early Feb. While they initially only expected to see losses to barley and durum, they are now including wheat as well. So far, wheat losses are about 1 MMT, but we’ll get a better look at all of the damage in just a few weeks.
Some of the big news last week was the Iranian purchase of US hard red winter wheat – at least two cargoes that we know of and some suggest it could be more. Kind of hard to believe that the country leading the way on sanctioning Iran is actually selling wheat to them, but humanitarian reasons allowed the sale to take place.