The biggest news in grain markets this week should be the United States Department of Agriculture’s report May 12 that will include the agency’s first yield forecast for the U.S. winter wheat crop.
But a potentially bigger issue, drought in Australia, has yet to find traction among traders.
After coming through winter in good shape, the southwestern part of the U.S. winter wheat growing area is now dry, although showers were forecasted for this week.
As of May 9, the amount of the winter wheat crop judged to be in good-to-excellent condition was 59 percent, down from 63 percent the week before and 68 percent two weeks ago.
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The yield estimates for wheat and soybeans were neutral to bullish, but these were largely a sideshow when compared with corn.
However, that is still better than last year at this time when weather problems pushed the good-to-excellent rate down to 45 percent.
If the dry areas get good rain, that will increase the likelihood of at least average yields and hold open the possibility of a crop as big as last year, despite fewer seeded acres.
While rain would be nice in the U.S., the need in Australia is greater.
Farmers there are still seeding and that may be why markets are ignoring the situation, but soil moisture is dismal, particularly in eastern areas.
It is hard to justify writing off a crop just as it is being seeded, but news stories from Australia paint a bleak picture.
Reuters News Agency reported last week that state agronomists in New South Wales predicted that canola production would be down by 60 percent because of reduced seeded acreage and drought.
Last year, the country produced 1.5 million tonnes of canola. Australia is traditionally the world’s second largest exporter of canola, after Canada.
Industry experts said that production is likely to fall below the 870,000 tonnes produced in the major drought of 2002-03. This year’s crop could be as little as 600,000 tonnes, they said.
If Australia’s drought continues, it would help support canola prices, currently weighed down by large stocks in Canada and expectations of a good soybean crop in the United States.
