First I offer an apology for errors in a graphic about lentils versus wheat in last week’s paper.
A corrected version appears this week on page 18.
The weather this week is expected to be conducive to rapid advancement in seeding in Western Canada and the American Midwest.
The U.S. had good rainfall last week and so has lots of moisture to get the crop off to a good start.
On the Prairies, western Alberta and central Saskatchewan are dry. Large areas on either side the Alberta-Saskatchewan border recently enjoyed much needed moisture.
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The weather is always a critical factor in crop production. If the weather co-operates this year, allowing Canadian and American farmers to produce average yields, supply will again be ample and prices of the major crop will likely be limited.
Conditions this spring in Europe, Russia and even Ukraine are good for crops.
But there was a surprise ending to Argentina’s soybean crop, with excessive rain at harvest, hammering its production down to about 56 million from 60 million previously.
And dry weather in Brazil is shrinking forecasts for its second corn crop by several million tonnes.
These production problems helped perked up crop futures markets over the past two weeks.
Commodity and hedge funds poured money into crop markets as part of a wave of investment into commodities in general but also in recognition of the production problems in South America.
Funds were also positioning to take account of the potential for a La Nina to develop in time to affect weather during the North American summer growing season.
A rapid transition from an El Nino to a La Nina has, at times, contributed to drought in North America’s major crop growing regions. In the same time frame, it can support wetter than normal conditions on the other side the Pacific, in Australia, India, Indonesia and Malaysia.
Ideas that palm production will recover in the second half of this year after being trimmed by dry weather over the winter have been weighing down palm prices recently and that affects vegetable oil prices in general.
It is impossible to say with certainty what the weather will be this growing season but we might be on safer ground to say that the market psychology is pumped up to be on the watch for weather disruptions.
This could generate more price volatility. The rallies might climb higher, but the declines could also be sharp if the weather worries prove unfounded and we return to a focus on ample supply. And the big price moves might happen rapidly.
So if you are looking for opportunities to price crop, it would be worthwhile to talk with your market adviser to set some price triggers so your wishes are carried out even though you might be too busy with production issues to be following closely a fast moving market.
