The violence in Ukraine continues to factor into the wheat market.
On Wednesday, Russian president Vladimir Putin Russian called on pro-Moscow separatists in Ukraine to postpone a vote on secession just five days before it was to be held.
He also said he was pulling back troops from the border region, although NATO and American military authorities disputed the claim.
If Russia has pulled back, it would lessen the tension, which had been escalating for about a week.
The influence on the wheat market picked up on the weekend when violence spread to Odessa, an important port city in Ukraine.
That added momentum to wheat futures, which were already rising, mostly because of drought damage to the U.S. hard red winter wheat crop.
Wheat futures are now the highest they have been since last summer, presenting an opportunity for prairie farmers to consider hedging prices for new crop.
A continuation of the rally can’t be taken for granted because wheat production prospects elsewhere are favourable and global stocks are ample.
An easing of tension in Ukraine, a widespread rain in Kansas and Oklahoma, a rapid advance of seeding in the U.S. Midwest: any of these factors could knock the wheat market off its rally.
But for now, the Ukraine crisis and U.S. southern Plains drought are the focus.
On the weekend, the type of violence that has plagued eastern Ukraine shifted to Odessa, a southern city on the Black Sea and the country’s biggest port.
Until now, with the crisis focused in eastern Ukraine, the situation had not affected the country’s grain exports. Just last week, Egypt bought 55,000 tonnes of Ukrainian wheat. This week, Ukraine was the low bidder on a tender to supply Lebanon with 30,000 tonnes of wheat. Its bid was $309.53 per tonne c&f.
But if the situation deteriorates into civil war, and violence envelopes Black Sea ports like Odessa, then buyers might look to buy grain from safer locations.
As Ukrainians worried over the future this weekend, people in the southern U.S. Plains sweltered in temperatures in the 30s C. That further stressed the hard red winter wheat crop.
Last week, the Wheat Quality Council’s annual tour of Kansas wheat areas showed the crop is struggling. The council’s yield forecast was 33.2 bushels per acre for a crop of 260 million bu.
Last year, according to U.S. Department of Agriculture figures, the average yield was 38 bu. per acre and harvest was 319.2 million bu.
On Monday, the weekly USDA crop progress report showed a sharp decline in crop condition in Kansas and Oklahoma as of May 4.
The Kansas wheat poor-to-very poor rating declined to 47 percent from 37 percent the week before.
In Oklahoma, the poor-to-very poor rating fell to 73 percent from 65 percent the week before.
But it is wise to consider managing wheat price risk now during this bullish period because there is the potential for prices to fall.
Western Europe had plentiful rain in the last week, improving the prospect for yields, and the crop there is ahead of normal, raising the potential for an early harvest.
Seeding is delayed in the U.S. northern Plains and the Canadian Prairies, but moisture is generally good. The crop was seeded late last year and yet bumper yields were harvested.
Rain in April in Australia helped set up farms for the seeding season after a dry southern hemisphere summer.
There are increasing signs of an El Nino developing in the Pacific, which often brings dry weather to Australia, but for now the state weather service there sees normal moisture in the east and a better than normal chance of above average rain in the west.
Turning to the Statistics Canada March 31 crop stocks report, had little impact on canola or wheat markets. The stocks of the major crops were large, but expected.
Some analysts, though, have focused on the lentil stocks number, at 648,000 tonnes.
That is close to the 10-year average, but the almost 60 percent decline from last year was an eyebrow raiser.
The canaryseed stocks number also generated comment.
Weber Commodities noted that at 39,000 tonnes, stocks were the lowest since the agency started reporting it in 2001.
The canaryseed market hardly reacts to the StatsCan report because it does not trust the numbers. For a full story on the canaryseed market, see the May 8 Western Producer Markets section.