Wheat retreats from highs
The holiday trading time period certainly had its share of action, with weather continuing to dominate the market’s attention. Hot and dry conditions in Argentina have already taken their toll on yields, and concern is spreading to Brazil’s southern production area.
The short term forecast calls for widespread rains early in the week across the majority of Argentina’s grain belt, with those rains eventually moving across southern Brazil. These rains are critical to stopping the progression of crop losses, particularly since some weather watchers are suggesting this might be all they get for awhile.
Here in the US, weather is still a concern as the warm, dry and very windy weather continues to sap what little moisture is available in the southern plains and across the northern plains/Canadian prairies. The Canadian government has reported that this is the driest fall/early winter in the last five years for the western Canadian crop growing region.
The US government’s Climate Prediction Center issued a report warning of more La Nina influenced weather for the country that would likely last until the onset of the Northern Hemisphere’s spring. Comparing the ongoing dry conditions to the Dust Bowl of the 30’s, they look for more dryness in the south and southeast. They look for above average precip across the northern tier of states, something would be welcomed by most.
La Nina is also causing unusually warm conditions across Europe and the Black Sea region. Europe has very little snow cover, while Ukraine and Russia have light snow cover. Neither region is forecast for extremely cold temps, but crops could get into trouble if that suddenly changed.
Meanwhile, the Southern Hemisphere’s wheat harvest is virtually wrapped up and exports are picking up for both Australia and Argentina. Demand for feed wheat is also increasing as the Southeast Asian markets continue to switch from corn to wheat, mostly from Australia. The displaced corn sales that would have gone to the US, Argentina or Ukraine is having a dampening effect on corn prices, despite the lower production prospects from South America.
Export sales from the last week of the year were quite small, with only 168,000 tons sold, the lowest weekly total in two years and about half of the low end of estimates. We continue to see sales go elsewhere, with Egypt resuming their buying program with a 240,000 purchase from Ukraine, Russia/Kazakhstan and France. Interestingly, France was the cheapest offer at $258.75/ton, while Russia’s offer of $262.90/ton was $14/ton higher than their last sale in mid December.