Crop market forecasting for the coming months has become more complicated as questions about American policy direction are added to the usual issues about weather and economic developments.
Donald Trump is busy selecting loyalists for his cabinet. With both houses of Congress also in Republican hands and likely to be in tune with Trump’s agenda, his second administration could be a greater disrupter than his first.
Crop markets could be roiled by tariff hikes that spark trade wars and fuel inflation, changes to renewable fuel policies and health policies that discourage consumption of vegetable oil, just to name a few uncertainties.
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China’s grain imports have slumped big-time
China purchased just over 20 million tonnes of wheat, corn, barley and sorghum last year, that is well below the 60 million tonnes purchased in 2021-22.
Trump’s nominee for health secretary, Robert J. Kennedy, has been a vocal critic of seed oils, food additives, glyphosate and other pesticides.
With all this dominating the headlines, it is easy to miss the more prosaic things that also affect grain markets.
For example, recent rain has greatly improved soil moisture in Oklahoma, Kansas and northern Texas, where hard red winter wheat is produced. It was dry earlier this fall.
The hard and soft winter wheat crops were 91 percent planted and 76 percent emerged as of Nov. 10, both slightly behind the five-year average, according to the U.S. Department of Agriculture.
The condition of the wheat crop is 44 percent good to excellent, 38 percent fair and 18 percent poor to very poor. That is similar to last year and much better than two years ago.
Rain on the U.S. southern plains was a slight negative for wheat prices.
A factor that might be positive for wheat in the second half of the crop year is the outlook that Russia will export less. It had a smaller crop this year.
Exports have recently remained strong but last week Reuters News reported that analysts expect the government’s export quota for the February to June period will be down to about 10-12 million tonnes, much less than the 29 million tonnes exported in that period last year.
A quota will likely be announced in January and if it is that small, it would likely lend support to wheat prices.
Turning to oilseeds, the market this fall has assessed a host of news.
The American soybean crop is large, but not quite as big as expected. The November U.S. Department of Agriculture monthly supply and demand report reduced the soybean crop to 121.4 million tonnes, down 3.3 million from last month.
Also the global supply of sunflower and canola is down from last year.
Most expect reduced export availability of palm oil, because recent production in Indonesia is unspectacular and the government there is planning to increase the amount of palm oil that can be blended into diesel for domestic use.
Market reaction to these developments saw soy oil climb but soybeans were more static.
The December contract for soy oil rose 17.5 percent from Sept. 1 to Nov. 11. January soybeans fluctuated during the same period but wound up less than one percent higher by Nov. 11.
January canola rose a little more than 11 percent in the same period. Canola is strongly influenced by the soy oil market.
Also, canola exports and domestic crush this fall remain exceptionally strong. Exports are running at twice the pace of last year at the same time and domestic use is up 14.6 percent over last year.
In the Nov. 11-15 week, the oilseed complex was mostly down on worries that the incoming Trump administration might reduce or end support for biofuel. Also, the rising U.S. dollar put downward pressure on American crop prices.
In the past week soybeans also saw downward price pressure as rainfall in Brazil and Argentina improved production prospects there.
Brazil’s forecaster, Conab, last week posted an expectation for 166 million tonnes of soybeans, up 12.5 percent from last year.
As noted, the American dollar is on a rally.
U.S. economic and labour data reports show the country continues to perform better than most other industrialized countries and inflation pressure remains. Also, inflation could be stoked by policies that Trump promotes, such as tariffs, deportation of undocumented labourers, and tax cuts that could raise the federal deficit.
So while the Federal Reserve will likely continue to roll back interest rates, the pace might be slower that elsewhere.
Expectation that U.S. rates could remain higher than Canada’s and other countries is helping strengthen the American buck. The Canadian loonie fell 4.4 percent from Oct. 1 to Nov. 15.
In the same period the euro and the British pound each fell 5.1 percent.
The Brazilian real fell 5.3 percent, the Australian dollar fell 6.4 percent and Japanese yen fell 7.5 percent.
