All the major agricultural commodities had their turn in the spotlight this week. Corn and soybeans led the AG complex higher early on, driven by weather concerns, while wheat joined the overnight rally ahead of tonight's USDA report, which is expected to show another reduction in production.
The heat in Europe remains the biggest concern for corn. A similar “heat dome” is also settling over parts of the US Midwest, lifting overnight temperatures at a critical stage as the crop tassels and begins pollination. Fortunately, the dome is centered west of the core Corn Belt, and with adequate soil moisture across most production areas, the crop should be able to withstand this burst of early summer heat.
Europe has a different story. Prolonged hot, dry conditions are beginning to take a noticeable toll on crop prospects. Corn condition ratings have deteriorated sharply, with France—the region’s largest producer—dropping 28 percentage points in just one week to 58% rated good-to-excellent. Forecasts offer little relief, with continued high temperatures and minimal rainfall expected over the coming week. The key question now is whether a European corn shortfall will be enough to generate a meaningful and sustained rally in wheat.
Conditions in Western Europe stand in stark contrast to those across the Black Sea. Harvest is only just underway in Ukraine and Russia, but early yields are running around 20% above last year. Romania also appears to be on track for a record wheat crop. The challenge for exporters is demand. With traditional buyers across the Middle East and North Africa largely absent, Black Sea suppliers will need to push wheat into non-traditional destinations. That abundance of supply is likely to cap any significant wheat rallies until fresh demand emerges.
Soybeans also surged overnight after reports of renewed Chinese buying. It has now been confirmed that China purchased at least 10 cargoes of US soybeans, providing enough optimism to lift futures.
Canola followed soybeans higher, but it also has its own weather story. Parts of eastern Saskatchewan and central Manitoba received 7 to 11 inches of rain last week, adding to already saturated soils. Some fields are likely to suffer drowned-out areas, while others could remain inaccessible to machinery for weeks. If conditions dry out, there is still time for the crop to recover. Elsewhere, however, regions that avoided the extreme rainfall are benefiting from above-average moisture and remain in good shape.
Next week
Once again, the market is being driven by weather, with problem areas attracting the bulk of the attention. It pays not to become too complacent about expecting prices to rally simply because of isolated production concerns. Agriculture has a habit of balancing itself out, with strong regions often offsetting weaker ones.
Ultimately, demand will determine the next major move. US grain values are once again becoming less competitive on the world stage, and unless prices move closer to Black Sea offers, the US is likely to struggle to win optional-origin export business.
Wheat markets are behaving a little differently these days, with the forecasted El Nino and continuing disruptions in supply due to the conflict in Ukraine,
The Ag commodity markets have largely tread water this week, with the much-anticipated USDA data dump keeping most participants on the sidelines. Traders made only
Despite consuming more grain than ever locally, Australian feed grain prices usually follow international values closely as we are still a large exporter. In the
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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.
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Weather wobbles
The heat in Europe remains the biggest concern for corn. A similar “heat dome” is also settling over parts of the US Midwest, lifting overnight temperatures at a critical stage as the crop tassels and begins pollination. Fortunately, the dome is centered west of the core Corn Belt, and with adequate soil moisture across most production areas, the crop should be able to withstand this burst of early summer heat.
Europe has a different story. Prolonged hot, dry conditions are beginning to take a noticeable toll on crop prospects. Corn condition ratings have deteriorated sharply, with France—the region’s largest producer—dropping 28 percentage points in just one week to 58% rated good-to-excellent. Forecasts offer little relief, with continued high temperatures and minimal rainfall expected over the coming week. The key question now is whether a European corn shortfall will be enough to generate a meaningful and sustained rally in wheat.
Conditions in Western Europe stand in stark contrast to those across the Black Sea. Harvest is only just underway in Ukraine and Russia, but early yields are running around 20% above last year. Romania also appears to be on track for a record wheat crop. The challenge for exporters is demand. With traditional buyers across the Middle East and North Africa largely absent, Black Sea suppliers will need to push wheat into non-traditional destinations. That abundance of supply is likely to cap any significant wheat rallies until fresh demand emerges.
Soybeans also surged overnight after reports of renewed Chinese buying. It has now been confirmed that China purchased at least 10 cargoes of US soybeans, providing enough optimism to lift futures.
Canola followed soybeans higher, but it also has its own weather story. Parts of eastern Saskatchewan and central Manitoba received 7 to 11 inches of rain last week, adding to already saturated soils. Some fields are likely to suffer drowned-out areas, while others could remain inaccessible to machinery for weeks. If conditions dry out, there is still time for the crop to recover. Elsewhere, however, regions that avoided the extreme rainfall are benefiting from above-average moisture and remain in good shape.
Next week
Once again, the market is being driven by weather, with problem areas attracting the bulk of the attention. It pays not to become too complacent about expecting prices to rally simply because of isolated production concerns. Agriculture has a habit of balancing itself out, with strong regions often offsetting weaker ones.
Ultimately, demand will determine the next major move. US grain values are once again becoming less competitive on the world stage, and unless prices move closer to Black Sea offers, the US is likely to struggle to win optional-origin export business.
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Click on graph to expand
Click on graph to expand
Data sources: Next Level Grain Marketing, Reuters, Bloomberg, USDA, Sov Econ, Mecardo
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Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
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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.
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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.