Don’t count your chickens before they’ve hatched

Frozen corn field

The CBOT wheat market caught a bid last night and closed at a new record for Dec ’22 at 1108¢/bu or roughly AU$572/t. (table 1 & figure 2) The troubled HRW market (KBOT) also bolted and closed the trading session at 1181¢/bu or AU$610/t.

The news that India might have overstated their ability to become a major export origin played on the market.  Extreme heat in March is believed to have wiped 6% or close enough to 7mmt off the previous production forecast.  The heatwave that much of India is sweltering through at the moment is not helping harvest nor the transportation to port either.

French weather is in the spotlight as well.  After a relatively dry winter, the forecast for heat and ongoing dry conditions is likely to trim yield forecasts.  The French crop had been looking very good, with the crop rated 91% good to excellent.  A big crop needs a big finish, so the 10-day forecast for temps to reach into low 30C is going to stress crops on shallow soil types and likely to cause irreversible damage.

The good soaking rain across much of the parched US central Plains was very well received, especially in Nebraska where the HRW wheat crop was going backwards quickly. At only 25% good to excellent and a record poor-very poor rating of 43%, the rain was just in the knick of time.  However, the trade view this as a ‘holding’ rain as opposed to a yield building rain. 

The forecast turns drier and much warmer as we head into next week.  This will provide opportunity for seeders to start rolling again in the mid-west and corn belt where planting of spring crops is lagging due to cold and wet conditions.  National corn planting at 14% complete compared to last years 42%.  The US farmer can plant vast areas quickly given the right conditions, so we may see a big uptick in planted area before the next round of wet weather brings seeding to a halt again.

Finally looking ahead, the dry Canadian Prairies look to be getting a reprieve in the next week.  A broad rain band will cover much of the main agricultural provinces and give the southern Prairie farmers a decent break to the season.  Canola planting is a little delayed and some regions, the planting window is nearly closed.  However, the planting window for cereals is wide open so a rain now is perfectly timed.

The week ahead….

It feels like the wheat market is getting squeezed.  Weather issues in Europe, the US and Brazil seems to be like a tightening noose on a commodity that is already facing war and fertiliser shortages.  I’m not sure I’d like to be on the short side of this market.

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Data sources: Reuters, World Ag Weather, Mecardo

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