It’s a shortened holiday trading week. Markets are closed for Good Friday on April 22, and the production schedule of the Express means I’m writing this week’s report with only Monday’s trade under our belt.
But to start this week, a mildly bearish market tone for grain markets turned notably higher during Monday’s session, led almost universally by the sharp romp higher in the United States wheat markets. And that was especially impressive with outside markets -- stock markets and crude oil sharply lower and the U.S. dollar index aggressively higher.
Yet wheat ignored the bearish outside influences and charged higher. The move put buying interest back into Chicago Board of Trade corn and to a lesser extent, soybean futures. In turn, Winnipeg canola futures gained $5 to $9 a tonne on Monday.
Chicago oat futures also traded higher, up in tandem with other grains, while garnering further support from the threat of wet, cold weather in the northern U.S. Plains and Western Canada to cause planting delays this spring.
But it was wheat that hosted the positive price show. Despite highly negative outside markets, wheat traders added weather premium into prices. Not only did less than expected weekend precipitation in the drought-like western areas of the central and southern U.S. Plains disappoint the market, but traders are now also concerned about dryness in areas of Europe and China.
After the close Monday, the USDA's weekly crop condition report stated that the condition of the U.S. winter wheat crop declined slightly from last week. The portion of crop rated "very poor" or "poor" increased two percentage points. Following are winter wheat crop condition ratings reported by USDA:
Very poor poor fair good excellent
This week 17% 21% 26% 30% 6%
Last week 16% 20% 28% 29% 7%
Year-ago 1% 5% 25% 55% 14%
New crop corn futures got an additional boost from the ongoing cold, wet weather across the U.S. corn belt, raising concerns about planting delays. December corn has posted a fresh contract high on Monday.
Cooler-than-normal temps are expected to continue through the week in the U.S. corn belt, with widespread rains forecast over the next seven days. The latest weather guidance predicts the eastern corn belt will receive the heaviest rains, with central Indiana in line to pick up four to six inches.
In the oilseeds, CBOT soybean futures garnered modest spillover from neighbouring pits, which helped to offset bearish factors like China's move to tame inflation, a downgrade in confidence that the U.S. government can control its indebted ways and fresh supplies becoming available in South America as the harvest there winds down.
Midwest weather maps remain wet for planting corn. The soybean/corn price ratio continues to highly favour the planting of corn over beans. The ratio is nearing the very low two to one ratio with the close of November beans to December corn futures at $2.04 on April 18.
The market is obviously trying to encourage corn acres at the expense of soybean acres. It would seem in the long run, if successful, a factor that could be very bullish for new crop soybean futures if bean acres are even less than current USDA intentions. But much depends on the weather. If corn planting is delayed into May, Mother Nature may then force some intended corn acres to be switched to other crops such as soybeans.
The wheat markets are setting the tone for all ag markets at the moment. Corn is finding it easiest to follow along, with oilseeds struggling. News that China is cancelling/deferring more and more old crop soybean purchases from the U.S. and South America can’t be good news for near-term canola demand potential.
The canola market’s trading bias immediately ahead is likely choppy to slightly lower. We have a long weekend ahead with markets closed on Good Friday and on Tuesday, April 26, Statistics Canada releases its first Canadian acreage estimates for 2011. Given the new crop seeding delay concerns, the trade seems wary enough to perhaps liquidate some positions going into this uncertain period for the market.
Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. Call 204-654-4290 or visit www.pfcanada.com to find out more about his services.