Wheat prices are again in the green with the rest of the grain markets as the weather is being more closely watched.
“Those who cannot change their minds cannot change anything.” – George Bernard Shaw (Irish Playwright)
Wheat Prices Just Starting to Heat Up?
Grain prices are all in the green this morning as the market continues to focus on trade flows and weather, especially for wheat prices.
Soybean prices higher this morning are supporting canola prices to get back closer to $500 CAD /MT on the November 2018 contract. One thing we noted for our canola GrainCents readers in this past Sunday’s Weekly Digest is the potential for a short-covering rally in soy oil, which would help canola prices. However, it seems that there are also plenty of bearish factors keeping a lid on prices.
Policy Talk Heating Up
The last few days there has been a lot more policy talk. First, we saw the European Union’s top court ruled that new biotechnology breeding techniques (i.e., CRISPR) are still to be considered GMOs. Anything that’s ever been modified whatsoever could be subject to strict European Union GMO laws. This could ultimately “lock out the benefits of genome editing from Europe,” according to the EU Association for Bioindustries. 
Also, in Europe has been the talk about the potential for more open trade with America, specifically as it relates to US soybeans. However, while US President Trump told Iowans that “we just opened up Europe for you farmers,” the EU says changes to agricultural policy in the European Union is not on the table.
Shaun Haney from RealAgriculture.com makes the healthy point that the current rhetoric being shared on both sides of the pond between the European Union and the US sounds similar.  Just a few months before the US and China entered into a trade war, it was suggested that China was opening its doors wide open for American agricultural production.
Wheat Prices Ignore Crop Progress
According to the USDA’s Crop Progress report yesterday, American fields continue to look healthy and advanced.
The US corn crop rated good-to-excellent (G/E) stayed at 72% (61% a year ago, 5-year average is 69%), but the percentage of the crop silking is now sitting at 91%, well above the 5-year average of 81%.
The US soybean crop rated G/E also held steady at 70% (59% a year ago, 5-year average is 65%) while the percentage of the crop setting pods sits at 60%. This is well above the 5-year average of 41% and last year’s pace of 45%.
In last Friday’s FarmLead Breakfast Brief, we looked at how grain prices were going to end their second straight week in the green. This was certainly the case for wheat prices which rallied off the likelihood of smaller crops in Europe and the US. The US Wheat Quality Council’s spring wheat tour through North Dakota suggests an average yield of just 41.1 bushels per acre.
While this is 3 bushels above last year’s final yield, it’s almost more than 4 bushels below the five-year average of 45.4 bushels per acre. It’s also a stark contrast from a record 48 bushels per acre that the USDA is currently forecasting for average spring wheat yields in North Dakota.
This in mind, the USDA still says 87% of the spring wheat crop in North Dakota is rated G/E. So who’s right? We discussed this in greater detail and the implication on spring wheat prices in our GrainCents Weekly Spring Wheat digest.
The best answer is yield monitors in a few weeks, albeit the spring wheat harvest has already started in the US. 4% of the US spring wheat crop has been harvested, including 35% in South Dakota, which is a good headstart on the 5-year average of 21% for the end of July. For the US winter wheat harvest, 85% of the crop has been combined, which aligns with last year’s pace of 87% and the 5-year average of 86%.
Grain prices at this time of year are less prone to weather but it’s looking like this year could be different.
For the next week, it’s expected that the southern half of the Canadian Prairies and most of the Northern Plains (North Dakota, South Dakota, and Montana) will stay fairly dry. This will likely have the biggest impact on crops like canola (and thus canola prices).
Keep in mind that last year’s crop across most of North America was helped by cooler weather in August. Might this year be different? And if not, what does it do to grain prices?
These are some of the questions I’m thinking about as a risk manager.