New crop conditions continue to weigh on the market

Wheat crop blowing in the wind

World wheat prices have continued to fall this week as new crop prospects improve. Good rain fell across the Northern US and Canada in the past week, with the forecast calling for some good follow up rains as well.

The US crop tour is underway with participants calling for record yield potential in Kansas HRW wheat areas.  Scouts there are calling yield potential at 58.1bu/ac (3.9t/ha) compared to the 5-year average of 43.1bu/ac (2.89t/ha).  Good late rains (see observed map below) have the crop in excellent shape, with the only question hovering over protein content.

The Canadians too are seeing a very timely burst of moisture.  There has been a swing away from wheat acres this year, according to StatsCan, citing a move to higher canola and corn acres.  Due to the late start, yields have also been revised lower to an average of 3.37t/ha compared with 3.52t/ha recorded last season.  Spring wheat seeding (the major class of wheat grown in Canada) is at 74% complete, well ahead of the 5-year average of 48%.  The USDA forecasts Canadian production for the 21/22 season to be 33.5mmt, down from 35.2mmt last year.

Canola prices have also come under pressure, albeit not to the same extent as wheat.  The Jan ’21 ICE contract has lost about C$35/t since the forecast (and now realised) rain across the Prairies.  With the outlook for increased oilseed demand into 21/22, prices are expected to remain firm.

The wheat market is in balance between its own fairly heavy fundamental outlook, with the knowledge that the US corn and bean crops are still heavily reliant on good weather.  While the wheat market feels softer, we are still at the mercy of the weather gods.

The week ahead….

Overnight, some bargain buying by China saw a limit up move in corn with wheat going along for the ride.  There is also a frost advisory message for some parts of the US corn belt which got the bulls excited. Continue to watch the spring wheat areas of the US Northern Plains and Canada which are facing historically dry conditions and will need excellent in-crop rains to reach full potential.

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Data sources: USDA, Reuters, Mecardo

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