Last week the United States Department of Agriculture published its March Grain Stocks and Planting Intentions Reports. The market was on the defensive before those reports. The downward bias was not helped by favourable weather conditions in most global wheat growing regions, with the exception of spring wheat areas in the United States and Canada.
Crop condition ratings in the European Union (e.g. France) are much better than at this time last year, and Black Sea crop condition ratings continue to be strong, albeit still with concerns over the extent of winterkill.
When the reports landed, the market was shocked by the estimates for US soybean and corn acreages. Both were well below expectation, and in the case of soybeans, at a level which could mean that demand for US soybeans is not going to be met in the coming year.
The market was up for corn and soybeans, dragging wheat higher as well. There was not quite the same boost for wheat though, because some of the crop acreage was absorbed by an increase in winter wheat acres. Wheat stocks were also higher than expected.
The gains for corn, and weaker gains for wheat, saw the spread between wheat and corn continue to close, making wheat more competitive into feed grain markets. Basically, higher corn prices are able to support wheat prices.
Still, the total crop acreage forecast for the US is below expectation, and by Thursday night, before the Easter break, enough of the market was questioning the USDA numbers to cause prices to pull back from the highs of the night before.
Meanwhile, although the narrative is positive for growing conditions in key wheat regions, the spring wheat areas in the US and Canada are dry, and in Ukraine and Russia, planting of spring crops has been delayed.
In Southern Ukraine planting normally begins in late February. This year is a month late while farmers waited for snow to melt and paddocks to dry out. In Russia the delay is averaging about 10 days for the same reasons.
So far spring is not bad. There has been no sharp lift in temperatures to date, and the snow is melting to allow field work to begin. Even though the area planted to date in Russia is 70 per cent below the same time last year, the delays are not expected to lead to problems.
Already analysts have been increasing their estimates for this year's Russian crop. Last year Russia produced 85.9 million tonnes of wheat. This year estimates are around 79.3mt, up from earlier estimates closer to 76mt.
This is one reason why Russian export restrictions are being questioned, and why global wheat prices are under pressure.
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