June 14 – Australia Spurs Wheat, Weather Helping Corn

Grain prices are in the green this morning as the complex continues to look past this week’s WASDE report and towards fresh weather forecasts.

“The more tranquil a man becomes, the greater is his success, his influence, his power for good. Calmness of mind is one of the beautiful jewels of wisdom.” – James Allen (British philosopher)

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June 14 – Australia Spurs Wheat, Weather Helping Corn

Grain prices are in the green this morning as the complex continues to look past this week’s WASDE report and towards fresh weather forecasts.

There are ongoing concerns for the crop in Western Canada as drought conditions are having an impact on production potential. For example, the drought has created a flea beetle issue for the canola crop, which is already stopped growing in a few places in Saskatchewan because of the heat. [1] That being said, DTN is forecasting that there’s be some wet relief soon with an inch to 4 inches expected to fall over the next week across the Prairies. [2] Is it too little too late? Might be for the Canadian mustard crop. [3]

Weekly precipitation forecast for Western Canada through June 21, 2019

In the U.S., DTN is suggesting that southern and eastern parts of the Corn Belt, as well as parts of the Delta are going to be wet over the next 7 days. [4] From a bullish perspective, this potentially means a more Prevent Plant acres (at least in soybeans) thanks to the slowdown of any remaining progress left in what’s already been a historically slow Plant 2019.

Weekly precipitation forecast for United States through June 21, 2019

It’s estimated that fund managers are now sitting in a net long position in corn of 200,000 contracts. Joe Vaclavik from Standard Grain points out that, considering funds were close to a net-short position of almost 400,000 contracts at the end of April, this is a bullish swing of 600,000 positions in just 6 weeks! [5] Conversely, speculators are still holding a net short position in winter wheat and soybeans.

Australia Grain Prices Watch Demand, Weather

I’ve been discussing it for a few weeks but drought is certainly a topic that’s being discussed more often in a few places around the world. In their estimate at the end of May, Australia’s Bureau of Meteorology said that the next three months would be, once again, dry and hot. [6] Unsurprisingly, ABARES lowered its production estimate of Australian wheat production in their updated forecast this week.

Australia wheat production June estimate from ABARES

That being said, Western Australia got a good soaker this week, “reviving hopes of at least an average crop” in the region, according to the Australia Financial Review. [7] If you recall, Western Australia has been the savior of grain production in the Land Down Undaa as its production has been trying to make up for the shortfalls in Eastern Australia. Digging in, Western Australia produced a near-record grain harvest a year ago but a dry fall has led to more farmers planting wheat and barley over canola or other expensive-to-plant crops. That being said, ABARES is suggesting that canola acres are up from their February estimate, and with it, the size of the canola harvest in Australia.

Australia 2019/20 canola production June estimate from ABARES

While ABARES lowered their wheat production number, they raised their barley harvest estimate. This was a direct result of a significant increase in acres planted over their initial forecast back in February.

Australia 2019/20 barley production June estimate from ABARES

This might be considered a bit bearish for Canadian barley prospects but the anti-dumping investigation by China into Aussie barley is still ongoing. Further, in recent weeks, domestic demand has helped barley prices sit equal with feed wheat prices and export barley prices. [8] This, intuitively, keeps the door open for Canadian barley exports to keep cruising towards a new record: through Week 45 of the 2018/19 crop year, 2.07 MMT has been shipped out, 19% more than the same time a year ago (which, by the way, is the current record).

Canadian 2018/19 weekly barley exports through Week 45

Other Datapoints Grain Markets Are Considering

Flipping the page to other parts of the world, China’s Ag Ministry let us know this week that the size of their pig herd in May was 24% smaller than the same month a year ago. [9] While China does not disclose the actual numbers behind the size of the herd, that 24% likely represents just under 100 million animals. I repeat: 100 million animals.

Strategie Grains lowered its estimate of 2019/20 wheat exports by 1.1 MMT to now sit at 22.1 MMT. [10] That would still technically be more than their revised estimate of 2018/19 wheat exports of 21 MMT. This revised wheat exports forecast comes off a downgrade of EU soft wheat production by 900,000 to now sit at 142.8 MMT. This would be a 12% improvement from last year’s smaller harvest, thanks to a drought. Comparably, barley production in the EU is estimated by Strategie Grains at 59.6 MMT. While this represents a 700,000 decline from their previous estimate, it is a 7% bump over last year’s barley production that was also negatively impacted by drought.

Also seeing a bump in wheat production is Ukraine. APK-Inform is forecasting that the winter wheat crop in the Black Sea nation will jump 8.4% year-over-year to 25.9 MMT, mainly thanks to higher yields.

Which Direction Next for Grain Prices?

Overall, grain markets are certainly cognizant of the production potential of the 2019/20. Should Western Canada receive the rains in the forecast over the next 7 days, you’ll likely see canola and spring wheat prices start pulling back. For the latter, given the increase in acres, there is some big spring wheat production potential in the ground right now but only if some moisture comes along.

It’s the opposite though for soybean and corn prices though as the rains have been anything but helpful in the Midwest. Should these rains materialize, it’ll continue to soak already-wet soils and the yield potential of the crop will start to drop off. Put simply, there might be more room to run in this rally, especially for soybeans.

Have a great weekend!

To growth,

Brennan Turner
TF: 1-855-332-7653
@FarmLead on Twitter

At 7:30 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3331 
CAD, $1 CAD = $0.7502 USD)

July Corn: +5.5¢ (+1.25%) to $4.475 USD or $5.596 CAD
July Soybeans: +5.8¢ (+0.65%) to $8.938 USD or $11.914 CAD
July Soybean Meal (per short ton): +$2.60 (+0.8%) to $324.30 USD or $432.31 CAD
July Soybean Oil (cents per lbs): -0.01¢ (-0.05%) to 28.01¢ USD or 37.34¢ CAD  
July Oats: +2¢ (+0.65%) to $3.065 USD or $4.086 CAD
July Wheat (Chicago): +2.5¢ (+0.45%) to $5.38 USD or $7.172 CAD
July Wheat (Kansas City): +2.3¢ (+0.5%) to $4.705 USD or $6.272 CAD 

July Wheat (Minneapolis): +1¢ (+0.2%) to $5.673 USD or $7.562 CAD
July Canola: +3.6¢ (+0.35%) to $10.39/bu / $458.10/MT CAD or $7.794/bu / $343.64/MT USD

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

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