Politics, the USDA, and a big wet blanket

First, President Trump posted on Truth Social that “China would likely quadruple its U.S. soybean imports.” The comment, more hopeful than factual, was enough to send the soybean market sharply higher. The very next day, China slapped a 75.8% import tariff on Canadian canola seed, effectively closing the Chinese market to Canadian exporters. Canola futures promptly hit limit down. A stark display of politically fueled volatility.

Perhaps the biggest news to emerge this week was the surprisingly bearish USDA report. The report was, in fact fairly neutral for wheat, although the cut to global ending stocks would give the bulls some encouragement. It was the corn story that acted like a wet blanket across most ag commodities. Yield was raised by 7 bu/acre to 188 bu/ac, above pre-report estimates and an all-time record. Area was also increased by nearly 2 million acres, with the net result a steadily building US carryout position that is going to require a fair bit to shift. The increase in corn area came at the expense of soybeans, which saw a surprise reduction. This added to some of the recent strength in soybeans following the President’s speculative social media post.

Adding to corn’s malaise is the fact that Brazil’s corn crop is edging towards 140 mmt. Corn now under $4/bu is going to be buying its way into feed ration considerations, and wheat will have little choice but to follow it if it has any chance of fulfilling forecast SE Asian demand.

This week’s wheat market has been influenced by surging new crop supply and export activities in the Black Sea and the US. Black Sea FOB prices have continued to drop after a brief rally as harvest moves into better yielding areas. The USDA has Ukraine at 22 mmt, whereas a private analyst recently posted a 19.7 mmt wheat crop. It is not certain if the discrepancy between the two sets of data is because of Russia’s recent activity of shipping more wheat out of the occupied territories.

It is going to be interesting watching the outcome of the ‘ceasefire’ discussions between Trump and Putin. It seems both parties are inclined to cede Ukrainian land in order to get the ceasefire over the line. Understandably, Ukraine is not that happy with that arrangement, given they are not invited to this initial discussion. If the ceasefire deal gets over the line, expect the wheat market to relax a bit (it doesn’t have that much more room to go lower!). But if Zelenskyy says ‘no deal,’ I suspect we are in for more of the same uncertainty.

Harvest is rapidly progressing in the Northern Hemisphere. US winter wheat is mostly complete, Ukraine wheat harvest is 60%, French soft wheat crop is all but finished, but quality issues are hovering over German, Polish, and Romanian wheat quality.

Good rains in Canada and Australia have revived hopes of better-than-average crops. I wrote a week or two ago that the Southern Prairies were dry and crops were likely below average. However, since then, rains (35–75 mm) across SW and NE Saskatchewan and SE Alberta will likely hold production from dropping further on later sown crops, but the timing is not great for quality on swathed canola and ripe wheat and lentil crops.