The news to finish last week was the somewhat surprising USDA stocks and acreage report. Could it be the US farmer is playing a game with the USDA via their survey answers? One way to ensure high prices is to deliberately low-ball the proposed area of an already tight commodity! We are being a tad flippant, but it wouldn’t surprise us to find that the ‘actual’ planted acres for corn, in particular, will be significantly higher than those re-ported in the preliminary acreage report.

This week marked the first of the seasonal crop condition reports from the USDA.  Reuters report that winter wheat is sitting at 53% good to excellent, right on the trades estimate but below last year’s 62%.  Good rain through the US HRW and SRW areas have seen conditions improve and will hold that crop in good stead (figure 1). Don’t be surprised to see continued improvement as the weather gradually warms up. 

However, the Northern Plains, which are typically spring wheat areas bordering Canada, are very dry.  Pressure is mounting in the wheat pit around concerns of drought threatening the spring planting period.

Similarly, the Canadian Prairies are abnormally dry.  The snowpack has long retreated and an absence of meaningful rain has our Canadian counterparts a little nervous ahead of their seeding campaign. The attached map (figure 2) shows that vast stretches of the Canadian Prairies have had less than 10mm for the past 30 days and farmers are waiting for a seeding rain. There is still plenty of time for rain to correct the anomaly, but the timing will prove crucial. 

Perhaps most at risk is canola which has a cut off date around the end of May.  Forecasts point to a storm this week which is tipped to bring between 10-30cm of snow.  The snow to liquid water ratio is about 10 to 1, so this will help but not be the soaker they are hoping for.  There is plenty of time and the price will encourage farmers to plant right up to their insurance cut off date, but remains a flag to watch. 

Commodity Conversations

The week ahead….

 Speculation will swirl for a couple of days over some weather events which are happening as we speak.  There has been a frost event in Europe, dry conditions in Brazil (after being too wet), the timing of the break in North America etc, should keep the market occupied.  Expect additional volatility in the short term.

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Data sources: USDA, Reuters, Mecardo

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