Weather drives the news cycle

Wheat markets turned a little sour this week as a lack of weather-related problems allowed the price to drift south. Good rains have been recorded across the US Plains, where the HRW wheat crop had been getting dry. Crop conditions have responded by lifting 4% points on the week to now being 49% good to excellent and on par with last year. Good Spring rains have also allowed for rapid row crop planting, with soybeans at a record 18% complete and corn right on average at 24% complete.

The weather market is starting to throw up a few flags, with a few areas recording less rainfall than they’d like. Notably, key Chinese winter wheat areas are drying out after a very good start. Last year, they produced a record 140 mmt crop which resulted in a significant decline in imports. This year, earlier forecasts suggested a crop as good, if not better, than last year. A dry spell is not necessarily the death knell for the crop, but it will require monitoring.

Information about the state of Ukraine’s crop is being overshadowed by the ongoing dispute and current attempts to secure a ceasefire. Wheat production is forecast at a modest 17 mmt and canola 3.9 mmt, down 5% from last year. This compares to 33mt for wheat and 3.1mmt of canola grown in 2021. The rise in canola production can be attributed to the Ukrainian farmer trying to grow a crop with higher gross margins on reduced acres.

While on canola, the oilseed is a case of mixed fortunes. A late-season fight for acres has allowed Canadian (GM) canola to claw back everything that was lost on earlier tariff and trade obstructions. Fears that the Canadian farmer would plant less canola have prompted Winnipeg ICE to surge, along with positive discussions around biofuel mandates and a softer tone coming from Beijing. However, for growers of non-GM canola, European futures appear to have hit a ceiling. A weak economic outlook, falling crude prices, and conflicting and confusing trade barriers are pushing the price of EU canola lower.