Another week of generally benign growing weather over much of the northern hemisphere acted as a weight on grain prices, but a recovering U.S. employment situation supported prices.
The result was fairly steady futures prices for oilseeds, where increased demand will make a difference because oilseed supplies are tight. Wheat and corn were weaker because of less worry about supply. Wheat particularly has trouble rallying because of expectations of a large carryover and a big harvest.
The better than expected U.S. job number might indicate a weakening recession but many analysts believe the recovery might be a bumpy ride.
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Lending support to that idea was news that the Baltic Dry Index, which tracks ocean shipping costs on international trade routes, fell 17 percent last week on weaker demand for coal and iron ore from China. This could indicate the effect of China’s stimulus package is running out of steam.
If China imports fewer commodities, that would pressure prices lower and grain prices could get caught in the down draft.
Pulse prices have held stronger than other crops in the past year and news from India about its sputtering monsoon supports the prospect of another year of strong exports that will support prices.
The monsoon was weak in June and recovered to normal in July but now seems weak in August. Overall rain was barely a third of normal in the first week of August and the forecast for this week was for drier than normal conditions.
Worries about damage to India’s sugarcane crop have pushed futures prices of that commodity to 28 year highs.
The weather and the coming Indian festival season are also pushing pulse prices higher even though the area seeded to summer pulses is up over last year.
The head of the India Pulses Importers Association told India’s Business Line newspaper that annual pulse production could be about 14 million tonnes, down from 14.66 million last year. If the monsoon does not revive later in August, production could fall from that forecast.
Total demand is 17 million to 18 million tonnes and the deficit is made up by imports from Canada and Myanmar.
The price of chana, or chickpea, has risen about 13 percent since the beginning of July. Chana is grown in the winter, but because the price has not risen as fast as summer grown pulses, consumers are substituting it in their festival recipes. Canadian yellow peas often fill in for chana.
While India’s weather is not co-operating, Australia’s crop so far is OK, but El Nino forecasts from Australia and the United States last week predicted the weather phenomenon would strengthen over the next two months.
It could become a weak to moderate El Nino by the Northern Hemisphere autumn and strengthen to moderate-to-strong by winter.
Previous El Ninos have hurt crop production in Australia and palm oil production in Malaysia and Indonesia. Australia harvests its wheat during its spring, our autumn, so the crop might miss the worst effects of El Nino.
El Nino sometimes brings heavy rain to South America in October and November, which could complicate soybean planting in Brazil and Argentina.
