The rapid rise in grain futures prices has become more choppy lately as the market awaits new direction from weather trends and seeded acreage reports.
Statistics Canada comes out with its estimate of seeded area on June 22. The next acreage report of the United States Department of Agriculture comes out June 30 and the next estimate of the size of the winter wheat crop is due June 9.
Most analysts believe that Statistics Canada’s large summerfallow number of 11.7 million acres, a 15 percent increase over last year’s actual number, in the March seeding intentions report will be lower. Grain prices, especially wheat, have rallied since the March surveys upon which the report was based, likely sparking a lot more seeded area. Just how much more is open to speculation, with some expecting an additional two million wheat acres and one million canola acres. Saturated soils will prevent some seeding in northeastern Saskatchewan and parts of Manitoba, but soggy soil was a bigger problem last year in Manitoba. The market will move if the June 22 report delivers surprises on seeded acreage.
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Generally most prairie regions have excellent moisture this spring, providing a good start to growth and insurance against dry spells this summer. If this continues, it will be a negative factor in market prices.
In the U.S., the winter wheat problems are well documented. Focus has now turned to the Midwest corn and soybean region. Again, conditions are generally excellent and are putting downward pressure on grain prices. In the June 5 USDA crop condition weekly report, corn and soybeans were both rated in better shape this year compared to last year at the same time.
If there is a concern, it is in the western corn belt where there are pockets of dryness and forecasts for much warmer than normal temperatures in June, but for now this is only a threat, not real damage.
The other issue keeping traders occupied is the question of how the corn to soybean acreage ratio has shifted.
The ethanol industry’s strong demand for corn drove up its price during seeding, leading analysts to think corn acres will be about two percent higher than forecast in the early spring while soybeans will be down about two percent. If the USDA report June 30 differs significantly from that expectation, then that, too, would move prices.
Offshore, the biggest new threat to supply is dry weather in eastern Australia. Rain reached coastal areas last weekend, but did not penetrate to key farm districts inland. There are a couple of weeks yet before this becomes a major issue, but Australian growers are worried.
Last year, a crop-saving rain arrived June 11, after a long spell of dry weather, and Australia went on to produce a large crop.
On the demand side, the wild card, as we reported last week, is whether China’s recent, tentative corn imports turn into a regular thing.
