Weather bringing ‘heat’ to the market

The wheat market is in a tug of war between tightening old crop stocks and new season supply. The USDA released their April stocks report quietly last Friday night. Perhaps surprising the market was the drop in corn and wheat stocks more than the trade had been estimating. China is again the ‘culprit’, having switched to feeding more wheat due to the soaring cost of corn. The USDA project that China will feed 40mmt of wheat this year, more than double earlier market predictions.

Tightening corn and wheat stocks will be the rallying cry for market bulls for the foreseeable future and it is likely to be the catalyst for increased volatility.  Of the 295mmt of wheat in storage globally, 50% is held in China and another 9% held in India.  Collectively, the world’s top 8 exporters now hold approximately 80mmt between them.  Similarly, the US will be running on fumes for corn stocks.  It is estimated that US reserves have fallen 60% year on year and will be running at 9.2% stocks to use, implying only 33 days of use is available (source: Karen Braun @kannbwx).

These facts alone put huge emphasis on new crop supplies. Currently, Brazil’s safrinha (second) corn crop is looking for rain.  The issue with this year’s safrinha crop was it was planted late.  It is thought that 30% was planted after the typical cut-off date.  This means that a fair percentage of the crop will be in the key reproductive stage as the weather turns drier and colder.  Dry weather now could hurt the vegetative state that determines yield potential.

The northern US Plains are abnormally dry but could get some moisture this week.  Canadian Prairies are a case of the ‘haves and haves not’.  A winter blast intensified, dropping snow and rain totaling 20-35mm – but localised over Manitoba and SE Saskatchewan.  The majority of Saskatchewan and Alberta (key growing areas) missed out.

Commodity Conversations

The week ahead….

The issue with tight stocks, is that every threat – perceived or real – will spook the market.  Might want to buckle up.  It could be a wild ride.

Have any questions or comments?

We love to hear from you!
Print This Post

Click on graph to expand

Click on graph to expand

Click on graph to expand

Data sources: USDA, Reuters

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!

Click on graph to expand

Australian wheat farm
Grains & Oilseeds

Black Swans everywhere

Earlier this week, shivers went through the stock market on news of a debt crisis enveloping Chinese property developer, Evergrande. The company is said to

Read More »
Canola fields
Grains & Oilseeds

Waxing oilseed markets

Canola prices both here and overseas are reaching rare air. It is easy to point the finger squarely at Canada as the reason for the

Read More »
Canola field
Grains & Oilseeds

Canadian canola disaster worse than thought

Statistics Canada has released its latest canola production forecasts yesterday and they are even more pessimistic than previous forecasts. Canola production estimates were slashed 2.1mmt

Read More »

Don’t have an account with us? Join free.

You can have full premium access to all of our content with a monthly or annual subscription. 

Alternatively, create a free account to access our Insights blog and two free premium article a month!

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
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.

Photo of a farmer surrounded by Merino sheep in dusty yards
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. 

Image of harvested grain pouring into a chaser bin

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.