May we live in interesting times - to paraphrase an ancient Chinese curse - seems particularly apt in commodity markets right now. The very strong rally we’ve seen across all commodities, took a breather this week. End of the month, some profit taking and some rain in key areas allowed the market to take the foot off the pedal. Make no mistake, the bull channel we are in, especially for corn, hasn’t gone away. The next 3-4 months will be under the microscope as corn planting, then development and most importantly, pollination in July/Aug, will be scrutinised for any hiccups.
Wheat in isolation doesn’t have too many problems at this early stage, but will likely remain a follower of corn. You could make an argument that as wheat is cheaper than old crop corn, more and more wheat will be fed. This may tighten the balance sheet enough to make a story, but at this point, wheat will go with the flow. The rapid rise in prices has distorted world trade to a degree with rumours of a French cargo of wheat being delivered to the US East Coast.
Rains fell across the most northern (and arguably the most important) areas of Brazil last week but largely missed the southern half of the safrinha corn areas. NDVI data shows some improvement in the state of Matto Grosso, but the states of Matto Grosso do Sul and Paranã look to be in big trouble. Some estimates are calling the Brazilian crop around 95mmt, down from 105mmt, which leaves a significant dent in global supplies.
US winter wheat crop conditions dropping from 53% gd-exc (good to excellent) to 49% gd-exc gave the market bit of a surprise, although this was balanced out by rapid spring wheat planting (28% planted versus 19% on average). Conditions through the northern US Plains and Corn Belt (Iowa, Illinois, Minnesota) have also been dry, and none more so than North Dakota. While these conditions make for quick seeding progress, it does raise the spectre of drought conditions moving into Summer.
It is not all bad news (in terms of production). A previously dry western Europe looks to get a healthy shot of moisture this week. Look to see MATIF canola futures lose some ground as some of the risk premium gets eaten up. Similarly, the Black Sea regions in southern and central Russia and Ukraine have had good rains in the past month, building potential for another big production year. There has been some winter kill through central Russia but these areas will likely get resown with spring wheat or sunflowers and conditions are to say the least, favourable.
The week ahead….
Watch for increased volatility. CME group will expand daily trading limits on corn, wheat and beans on May 3. This is in response to several of the commodity groups trading to their limit and locking out participants.
Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
Listen to the podcast
Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.
V is for Volatility
Wheat in isolation doesn’t have too many problems at this early stage, but will likely remain a follower of corn. You could make an argument that as wheat is cheaper than old crop corn, more and more wheat will be fed. This may tighten the balance sheet enough to make a story, but at this point, wheat will go with the flow. The rapid rise in prices has distorted world trade to a degree with rumours of a French cargo of wheat being delivered to the US East Coast.
Rains fell across the most northern (and arguably the most important) areas of Brazil last week but largely missed the southern half of the safrinha corn areas. NDVI data shows some improvement in the state of Matto Grosso, but the states of Matto Grosso do Sul and Paranã look to be in big trouble. Some estimates are calling the Brazilian crop around 95mmt, down from 105mmt, which leaves a significant dent in global supplies.
US winter wheat crop conditions dropping from 53% gd-exc (good to excellent) to 49% gd-exc gave the market bit of a surprise, although this was balanced out by rapid spring wheat planting (28% planted versus 19% on average). Conditions through the northern US Plains and Corn Belt (Iowa, Illinois, Minnesota) have also been dry, and none more so than North Dakota. While these conditions make for quick seeding progress, it does raise the spectre of drought conditions moving into Summer.
It is not all bad news (in terms of production). A previously dry western Europe looks to get a healthy shot of moisture this week. Look to see MATIF canola futures lose some ground as some of the risk premium gets eaten up. Similarly, the Black Sea regions in southern and central Russia and Ukraine have had good rains in the past month, building potential for another big production year. There has been some winter kill through central Russia but these areas will likely get resown with spring wheat or sunflowers and conditions are to say the least, favourable.
The week ahead….
Watch for increased volatility. CME group will expand daily trading limits on corn, wheat and beans on May 3. This is in response to several of the commodity groups trading to their limit and locking out participants.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Click on graph to expand
Data sources: USDA, Reuters, Dartboard Commodities, World Ag Weather
Categories
Have any questions or comments?
Canola nearing 18 month highs
You can’t turn on the TV without seeing the latest developments in conflicts in the Middle East. The latest threat to Iranian oil production has
Welcome back Volatility, my old friend
Are we are witnessing a full blown fundamental rally, or a technical repositioning of short positions? The answer could be both, as one will lead
Localised production cuts unlikely to impact prices
Last week we received a query about the impact of dry conditions in southern cropping zones and the recent frost in the Riverina on the
It’s life Jim, just not as we know it
Are there signs of life in the wheat market? Wheat has struggled for direction in the past few months namely because of Northern Hemisphere harvest
Want market insights delivered straight to your inbox?
Sign up to the mailing list to get regular updates to new analysis and market outlooks
Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
Listen to the podcast
Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
Research: Analysis of the Australian sheep flock
In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
SERVICES AND CAPABILITIES STATEMENT BROCHURE
We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.