The bitter cold that settled over much of Canada and the United States early this week helped lift crop futures a little.
There was concern that it was cold enough in U.S. winter wheat regions to harm the dormant crop in some areas. Most at risk were areas with dry soil and places where there was little snow cover. The snow cover in Nebraska and central Kansas is thin, but the area that is dry is much less than last year at this time.
We won’t know the real impact on wheat production for quite a few weeks, and even then the damage would have to be serious to significantly change the dynamic in the wheat market, which has a comfortable global supply.
The cold was also snarling grain and livestock transportation. Several U.S. hog plants were closed Jan. 6 because of the intense cold.
The cold will also lead to an in-crease in livestock feed demand.
However, all these factors are minor placed against the developing crops in South America, which have the potential to deliver a record large harvest that will put downward pressure on crop prices.
Argentina had hot dry weather for a couple of weeks in December but received rain at the end of the month and the first few days of January.
It is hot again this week, but more rain is forecast by the end of the week. Analysts are upbeat about production prospects.
They peg Argentina’s soybean crop at 55 million tonnes, up from a little more than 49 million last year.
Brazil’s soybean crop has enjoyed favourable weather from the start, and production is expected to be 87 to 90 million tonnes, up from 82 million last year.
Harvest has begun in Brazil on a few early seeded fields, but the vast majority of harvest starts in late February and early March. Rain will be important in the pod filling stage in early February.
Another big negative factor in the market is China’s ongoing rejections of U.S. corn and dried distillers grain shipments because they contain a genetically modified variety not approved by Beijing.
Before this problem, the U.S. Department of Agriculture had projected that China would import seven million tonnes of U.S. corn in the 2013-14 marketing year.
Chinese data show 601,000 tonnes of corn and corn byproducts have been rejected. The issue has added to downward pressure on corn and hammered U.S. DDG values down by 20 percent in a week.
Some of the rejected corn shipments were diverted to Japan and South Korea, but the situation could have greater market impact the longer it goes on.