Weather market jitters

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.