Top wheat producing state, Kansas, has already seen temperatures plummet to -25C, well below the threshold for winter kill. The caveat here is the soil temperature. If the ground is covered by snow, soil temperature can be relatively insulated. The bare ground freezes much more readily and, as such can cause damage to dormant crowns of wheat plants. Fortunately, in the US Plains, spotty snow cover and good moisture levels should see any damage kept to within 5-10% of the area.
Wheat prices have since retreated from the earlier highs as profit taking and a thought that any freeze damage was already priced in.
What is less clear is what is occurring in central Russia, where a very dry winter has a significant amount of winter wheat fields devoid of meaningful snow cover. A lack of clarity of what is happening on the ground means heightened volatility until we see crops emerge from dormancy in late March/early April, and we can assess any damage.
Complicating any ‘fundamental’ driven moves in wheat will be geopolitics. The US President is trying to broker a peace deal with Russia. Any kind of truce or cease-fire could take any residual risk out of the market. You also have the unknown impacts of the broad spectrum tariffs being throw around. A downturn in global economics could have ramifications in food and beverage demand as well as energy, pharmaceuticals, tech, and automotive sectors. I can’t help feeling that this year could be quite difficult to navigate.
Brazil’s soybean harvest is making good ground at 23% complete (+8% for the week) compared to 32% this time last year. Safrinha (second) corn crop sowing continues to lag at 36% of the intended area (up 16% for the week) but compared to 59% completed last year. The rush to get the crop in stems from the fact you can pretty much predict by season by the calendar. The dry season starts in May through to October, so anything that delays planting and emergence can mean corn flowering and grain set happens outside of the ideal window, having big impacts on final yield.
Rumours of a possible trade deal between the US and China are making their way into circulation. Corn and beans rallied last night as (two of) the potential beneficiaries.
Weather market jitters
Next week
The US President is living up to his reputation as a ‘wheeler dealer’. The strategy of ‘tariff first, deal later’ is going to keep the market on it toes. The Spring weather market is upon us and with tightening wheat stocks, doesn’t leave much room for any surprises
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Click on graph to expand
Data sources: Mecardo, Bloomberg, Reuters, SovEcon, USDA, Next Level Grain Marketing
Categories
Have any questions or comments?
Trump trade waves
Amid all the fighting and bomb dropping recently, the trade dispute issue had taken a back seat. Well fear no longer. Monday night, the US
Wheat rides the cycle
It feels like it has been a relatively stable week in the soft commodity baskets. As always, there is a raft of bullish inflows being
Peace of mind for a little cost
We normally think of managed funds as the “smart money”, but sometimes they do get it wrong. Last week was a prime example. The funds
Blink and you will miss it
And just like that, it was all over. The US brokered ceasefire seems to be holding, but the situation remains tense to say the least,
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.
MEET THE TEAM
Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
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.