Crop futures prices are rising, supported by ideas that supply might turn out tighter than expected.
The gains provide welcome optimism to offset the worries generated by all the tariff and trade war talk coming out of the mouth of American president Donald Trump.
From Jan. 1 to Feb. 21, Chicago May corn futures and Minneapolis spring wheat futures both rose slightly more than eight per cent.
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The canola May contract was up about 7.5 per cent, Chicago soybeans rose 3.15 percent and soy oil rose 16.6 per cent.
Crop prices last fall had fallen to levels not seen since before the COVID pandemic and Russia’s invasion of Ukraine.
The market had been lulled by the perception that the 2024 harvest generated ample supply and the crop seeded in South America to be harvested in 2025 would be a bin buster.
Now, that perception of ample supply is changing and prices are recovering from the lows, although they are still well down from the heights of 2021-23.
The slowness of the recovery is particularly frustrating for canola.
The fundamentals of supply and demand for the crop indicate that the price should be at a level high enough to ration demand.
The pace of demand from domestic crushers and the export market is so strong that supply could run out before the end of the crop year.
The most recent weekly Canadian Grain Commission report for week 28, or 54 per cent of the crop year, shows exports at 5.845 million tonnes, or 78 per cent of what Agriculture Canada expects will be the whole year total .
Domestic use is at 6.406 million tonnes, or 56 per cent of the forecast for the full year.
However, hanging over the market are Trump’s threats of a 25 per cent tariff on all Canadian imports and China’s anti-dumping investigation. These political issues weigh down the market because they could crash demand if implemented.
So canola is an outlier in this year’s market because of the politics.
Supply and demand should be the main market mover for other crops.
For example, corn prices are rising for several reasons, and they provide a strong base to help lift wheat.
Corn received momentum from the January U.S. Department of Agriculture monthly supply and demand report, which cut its estimate of the yield of the 2024 crop down to 179.3 bushels an acre from the previous estimate of 183.1 bu.
Since then, corn prices also have been supported by strong U.S. exports.
Even as China buys less American corn this year, other buyers are filling the gap, and total exports to early February were the second highest since 2007-08.
Declining corn crop conditions in Argentina due to dry weather also supported the market. The Buenos Aires Grain Exchange Feb. 12 lowered its corn production estimate to 46 million tonnes, down a million from last month and down two million from December.
Temperatures in Argentina’s corn areas were to hit the mid 30s C in recent days, adding stress. However, conditions in Brazil are improving for the seeding of its big second corn crop.
Wheat prices benefitted from corn’s rise and also had independent strength.
Last week’s cold snap in the southern U.S. Plains threatened the winter wheat crop, but analysts said protective snow cover might have prevented serious damage.
A cold snap in Russia’s winter wheat region also raised the potential for crop damage after a mostly mild winter.
As well, competition from Russian wheat could moderate as the government there imposed a quota, allowing only 10.6 million tonnes of exports from February to June. Last year, 26 million tonnes of exports were allowed during that period.
There are reports that Russia might not be able to ship the full quota because of the smaller crop in 2024.
The market was also digesting mixed signals from India.
Last week, the government forecast a record large wheat crop on increased acreage and good weather since the crop was planted in the fall.
However, Indian newspapers last week noted that rain since Jan. 1 has been well below normal and temperatures this month are forecast to be well above normal.
While recent rain was disappointing, it is the dry season and normal accumulations this time of year are not large.
Much will depend on temperatures in March.
Wheat stocks are tight in the country, even with a big crop in 2024, and domestic prices have been high.
If harvest this year proves disappointing, there is potential the country might have to lower import duties and allow in foreign wheat.
Another issue to watch is the poor condition of France’s wheat crop after heavy winter rain.
The status is not as bad as last year at this time, but it is lower than normal.
Rain last year caused the French harvest to drop 25 per cent from the previous year to the smallest size since the 1980s.
