Blink and you will miss it

The US brokered ceasefire seems to be holding, but the situation remains tense to say the least, and the risk of recommencement of hostilities remains. Global markets certainly give the impression that it is all over. Crude oil has retraced all the gains it made in the past week, dragging the ag commodities lower as well. The ‘risk off’ sentiment in the market seen this week is saying more than anything coming out of the White House.

 

The market feels like it is a bit oversold now that the risk premium has been stripped away and the funds are back in full ‘sell’ mode. I think we can expect some volatility as questions swirl around ‘regime change’ and possible anti-US sentiment, but for the most part, the threat of oil shortages and global conflict seem to have subsided.

 

So what happens now? We go back to trading the market as we were only 14 days ago. Northern Hemisphere harvest has started, the Black Sea is still a mess and trade deals are picked up where they were left.

 

The US wheat harvest has picked up pace after a slow, wet start. Now rated at 19% complete, up from 10% last week and 28% on average. I have not seen any information on yields or quality at this point.

 

Russian spring wheat area (30% of total wheat crop) cut to 11.8mha, down from 12.7mha estimated a few weeks ago (SovEcon). There is speculation that canola has replaced at least part of the wheat area as better margins and reduced export tax help to make cropping decisions. Total wheat production is being talked up to 84-85mmt, making total exports around 41-43mmt. While down on recent years, it will be enough to keep Russian ports near capacity and will likely mean prices become squeezed in the near to mid-term.

 

The Canadian Prairies received some welcome rain in the past week. Initial crop ratings peg Canadian spring wheats at 51% good to excellent, considerably lower than the 76% good to excellent recorded this time last year. Soil moisture across Saskatchewan remains lower than average and will rely on the forecast of a wetter summer to achieve an above-average crop. No alarm bells at this stage.

 

European crops have had some red flags in the past couple of weeks, but recent NDVI (satellite imagery) suggests the crop is a big one. Dry weather in northern Europe, in particular, raised concerns that France and Germany could experience some problems; however, the biomass data would suggest otherwise. Romania in the Balkans is tipped to achieve record yields.