Six-day futures rally broken

Six-day futures rally broken

ANALYSIS
Grain
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Pressure on United States markets is easing.

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Pressure on United States markets is easing as the US winter wheat harvest enters the last phase. There are also increasing issues with crops in other parts of the northern hemisphere.

None of that was enough to prevent a snap of the six-day rally that pushed futures to within a dollar or two of the highest prices in $A terms since early 2008. US funds took profits off the table from the recent rally, and then pressure came onto corn prices as longer term forecasts indicated cooler weather ahead.

It is unlikely that wheat futures will enter a full retreat in the near term though. Conditions are set to remain hot and dry in US spring wheat areas, and in a lot of the Canadian Prairies, for a little longer, continuing the gruelling pressure on those crops.

There are also concerns about the Russian spring wheat crop. Although Russia will still have a large crop, most estimates are coming in well under the United States Department of Agriculture projections, indicating more pressure will come onto the global balance sheet published by the USDA.

Other Black Sea countries are having their problems as well, with Kazakhstan indicating that it will limit exports to preserve stocks for domestic use after a cut to production for this year.

In France and Germany wet weather and floods have removed some production, but quality has to have been hit very hard.

The latest region to show up with some concerns is Argentina. It is early enough in their season, but dryness is becoming an issue.

Meanwhile, here in Australia, large parts of our winter cropping areas have had good rainfall events over the past week or so. In SA, the wettest July since 1995 has hit some parts of the state, pushing growing season rainfall ahead of where it would normally be at this time of year, despite the dry start.

The wet is now impeding paddock work for herbicide, fungicide, insecticide and fertiliser treatments in parts of SA, as well as in WA, western districts in Victoria, and parts of NSW.

In some respects, it is a good problem to have. The national crop is looking like becoming a large one, but for many current generation farmers, the inability to get onto crops when needed is an unusual problem for them to manage.

Farming systems, farm sizes, and farm machinery are very different to what was in vogue in the mid 1990s. Back in the 1990s wet winters delivered top yields without a lot of in crop treatments. Now those same yields are more reliant on growing season applications of herbicides and fertilisers.

Wet winters are a new challenge for many growers.

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