The optimism seen for more than a month now in oilseeds prices spilled over to wheat and, most surprisingly, corn markets early this week.
By the close of Oct. 27, as this was being written, the market had backed down from the highs set earlier in the day, but over the week, prices were up across the board.
Again, China is the main catalyst for the market’s optimism.
China has been buying soybeans at a torrid pace for some time, but in recent days it has also been buying Canadian canola and European canola oil.
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Then, over the weekend, rumours surfaced that China was in the market for wheat. This was supported by reports that Chinese traders had cancelled export sales because of strengthening prices at home.
Also, the Reuters News Agency reported that cold, wet weather in parts of China caused the corn harvest to drag on and delay winter wheat seeding. Reports say 10-20 percent of expected winter wheat acreage was not seeded.
In the past few years, this news would not have had much impact because China had large supplies of wheat in storage. But those stores are dwindling and concern is rising.
This supported international wheat prices, already edging up because of concerns over the parched and unseasonably warm nature of the American hard winter wheat area.
On Oct. 27, the U.S. Department of Agriculture published its first winter wheat condition report, finding 17 percent very poor to poor, 30 percent fair and 53 good to excellent. Farmers had seeded 88 percent of their expected acreage, which was the same as last year and slightly ahead of average.
Turning to corn, Asian traders said they thought China’s corn crop was smaller than expected. This implied that the Asian giant would export less this year, opening the door to larger American corn exports. Some even speculated China itself might import corn.
It will take confirmation of these rumours to again light the fire under corn and wheat. There is the possibility that the reported shortages and price increases are due more to the logistics of moving grain around China than to true shortages.
If the wheat rally resumes, it is likely to face a challenge from Australia.
After last year’s devastating drought, Australian farmers are smiling as they begin harvesting an expected bumper crop and will soon have supplies ready to market.
