The trade has pushed down corn prices and lifted soybean and wheat values to discourage American farmers from carrying out their plans to expand corn acreage by 6.4 percent.
Canola and wheat prices in Canada also rose, but the lower corn price will weigh down feed barley.
The U.S. Department of Agriculture last week released the results from its farmer seeding plan survey, which surprised the market with farmers’ plans for corn that were more optimistic than the market expected.
On average, the trade had expected about a two percent increase.
The United States does not need a big increase in corn acreage. Its exports are struggling because of the strong U.S. dollar, and supply is ample because year end stocks are expected to climb to 46.67 million tonnes from 43.97 million last year. The carryout would be the largest since 2005-06.
Corn futures fell a little more than four percent last week, while soybeans climbed one percent.
Soybean futures have been gaining on corn for several weeks, which might encourage American farmers to alter their seeding plans from what they told the USDA when the survey was done in the first half of March.
Minneapolis spring wheat futures rose 3.3 percent last week, supported by the USDA report, which said American farmers intended to lower spring wheat acreage by 14 percent from last year to the smallest level since 1972. The trade expected a three percent decline.
The reduction in spring wheat comes on the heels of an eight percent reduction in winter wheat area last fall.
Overall, U.S. wheat area will be down five million acres from last year, which is a nine percent reduction.
Wheat futures were also supported by increasing dryness in large parts of the southern U.S. Plains’ hard red winter wheat region, but gains were limited by a long-term forecast showing rain arriving in mid-April.
As well, wheat remains constrained by the expectation of large U.S. and world year end stocks.
Pulse crops will be seeded on some of those vacant wheat acres. American growers plan a 72 percent increase in lentil acres, 24 percent more peas and 19 percent more chickpeas. However, canola acreage is expected to decline two percent.
Canola futures have recovered strongly from the price collapse that bottomed out in early March. Canadian farmers might be looking more favourably at the oilseed than they were a month ago. Statistics Canada issues its seeding intentions survey April 21.
May canola topped$480 at the start of this week, comfortably back in the trading range it has been in for most of the crop year.
The supply and demand fundamentals for canola look good.
The record breaking pace of canola exports and domestic crush is unbroken now that China has agreed to delay its new tighter dockage rule until Sept. 1.
Also, world vegetable oil prices are stronger than oilseed prices because of reduced palm oil production following crop stress caused by dry El Nino weather in Malaysia and Indonesia.
The rally in canola prices is particularly impressive given the rally in the Canadian dollar, which is now trading near US77 cents, up from its low in mid-January of less than 69 cents.
The loonie is doing much better than anyone expected two months ago.
For example, Scotia Bank predicted earlier this year that the loonie would still be trading about 72 cents at the end of year. Now it expects it to remain around 77 cents for the rest of 2016.