The latest outlook report from the United States Department of Agriculture failed to amaze, as most projections about acres and crops were already factored into the news.
However, the Feb. 23 report confirmed the market’s assumptions and left prices up to the weather. And since Feb. 23, the weather has jumped in.
“No question that the markets are being driven by the drought conditions in Argentina. Last week was mostly dry in the main growing areas of the country with temperatures consistently reaching the 35 C to 40 C mark,” said Bruce Burnett of Glacier Media’s MarketsFarm, in his daily markets report Feb. 26, as the May canola contract in Winnipeg climbed to $520 per tonne from about $500 a month earlier.
“The soybean and corn crops in Argentina continue to get smaller as we get to the end of the critical month of February. The crop size is estimated at 54 million tonnes by USDA, but this figure will be substantially lower when the crop is harvested,” he said.
“The current MarketsFarm estimate of Argentine soybean production is 43 million tonnes. Exports of raw soybeans from Argentina will likely drop from eight million tonnes to less than four,” he said.
That has been good for canola. But Brazil’s strong soybean crop is likely to cool the hotter oilseeds markets over the coming weeks as that harvest rolls along, say analysts.
While most commodities have been along for the early spring ride, large stocks remain, according to the USDA’s report.
Soybeans will be found on about 90 million American acres, at or above the predicted acreage for corn this spring.
The USDA report suggested that despite having one of that nation’s smallest plantings of winter wheat in history at about 46.5 million acres, it might still grow more than last year.
But the markets weren’t necessarily buying it, as wheat too is holding on to some slight gains for the week.
The U.S. Drought Monitor report rates all of Oklahoma in drought conditions of moderate or worse, Texas is at 99 percent, Kansas at more than 70 per cent and Colorado is rated at 40 percent.
USDA estimates wheat production will be up, at 1.85 billion bushels, 90 million bu. more than last year.
It pegged the corn crop at about 14.4 billion bu., down about 200 million bu. from last season. However, reaching that level will require a 174 bu.-per-acre average.
American corn carryout inventories were down slightly from last year, according to the report, but remain at near record amounts.
Soybean ending stocks are the second highest on record, at 460 million bu. Some of the market’s optimism might be coming from the USDA’s prediction of another record sales year in 2018, 2.3 billion bu.