The panic over the cost of food has put grain prices on the front page.
The stories quote how prices surged during the winter, but often fail to mention that they have fallen substantially from the peaks.
After hitting $24 US per bushel in late February, Minneapolis nearby wheat futures are now about $11.50 per bu. and new crop September futures are below $9.
Nearby canola futures in late February were close to $750 Cdn per tonne. Early this week they were near $588.
In the same time frame, soybeans fell to $12.92 per bu. from about $14.50.
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Only corn is higher now than it was two months ago. Corn is currently near $6 US per bu. because of worries over wet weather in the Midwest delaying seeding.
The U.S. Department of Agriculture said in its weekly crop progress report that 27 percent of the corn crop had been planted as of May 4, up from 10 percent the previous week, but down from 45 percent in the same week in 2007 and well below the five-year average of 59 percent.
The planting figure was within trade expectations for 25 percent to 30 percent.
Soybean seedings were estimated at five percent, up from two percent last week, but down from the five-year average of 14 percent.
Spring wheat plantings showed a huge jump at 58 percent complete, up from 34 percent a week ago but behind the five-year average of 62 percent.
The forecast was for good seeding weather this week in the U.S. Midwest.
The annual U.S. winter wheat tour takes place this week. It provides a yield forecast on which the market will trade. Grain prices have generally fallen in the last few weeks because global seeded area has increased and, other than the slow pace of U.S. corn seeding, there is no major weather threat yet, although there is lots of time for one to develop.
For example, it is still dry in much of southern Saskatchewan and Alberta.
Another reason for the retracement in grain prices is that the panic in equity markets over the lending crisis in the United States is calming down, attracting back the big capital pools controlled by investment funds that had rushed into commodities in February.
A third factor weighing on prices is the expectation that the U.S. dollar might gain strength after a long decline.
The U.S. Federal Reserve Bank said last week it did not intend to drop interest rates again and that supported the greenback.
A weak U.S. dollar has encouraged strong exports and supported grain and hog prices. Traders worry the buck’s appreciation could threaten that trend.
But such factors are likely to be mere footnotes in the larger story of the weather.
With stocks so tight, any rainless week or hotter than average temperature in a key production zone in the world will start to push prices higher.
