Weather and geopolitical tensions dominate market talk

Frosts in France and drought worries in North Dakota and parts of the Canadian Prairies are providing price support to a worried crop market that urgently needs ideal crop weather to replenish global supply.

In the background, all markets are watching the rising tensions between Russia and Ukraine as well as China’s intimidation of Taiwan.

The recent spring snowstorm provided temporary relief to large parts of the eastern Prairies and North Dakota, but the western Prairies saw little moisture and all of the northern Plains region has a moisture deficit, meaning regular rain will be more important than usual.

Crop markets were also monitoring the cold weather expected to reach down into the southern U.S. Plains this week.

Overnight lows of -4 C were forecast in Kansas. If sustained for two hours, that would be enough to damage winter wheat at the jointing stage.

As of April 11, 29 percent of Kansas winter wheat was jointing.

Meanwhile, the prospect for Europe’s winter rapeseed crops suffered from a cold front early this month. The frost was particularly bad in France.

News coverage showed eerie night-time images of vineyards glowing with small fires as producers attempted to protect their grapevines from freezing. The cold also hurt rapeseed, but the damage had yet to be tallied.

European crop reporter Strategie Grains in its monthly report on April 6 before the frost lowered its forecast for the 27-country European Union rapeseed crop to 16.8 million tonnes, down from 17.05 million in March and 17.14 million in February.

Production might be only slightly better than last year’s 16.25 million tonnes, the second year of disappointing crops.

The production deficit caused the EU to be a top buyer of Canadian canola.

To the end of February, Europeans had imported 1.57 million tonnes of Canadian canola this crop year, up from 1.23 million at the same point the year before and only 257,000 tonnes at the same time in 2018-19.

And while talking about exports, I should note that the number of ships taking on crops at Vancouver’s port is back up to a more comfortable level.

I recently noted that in week 35 of the crop year only 13 ships were in port, down from the year’s average of 25. The number of ships in port the previous two weeks were also below 20. However, a large number of vessels were inbound.

In week 36, the number of ships in port was back up at 23.

While crop prices are supported by tight supply and weather threats, issues on the geopolitical level are providing some concern.

Russia has increased its military presence near the border with Ukraine. In 2014, Russia annexed Crimea and supported pro-Russia separatists in eastern Ukraine.

In addition to the troop build-up, Moscow on April 16 said it would restrict military and state-owned ships in the Kerch Strait, the narrow passage between the Black Sea and the Sea of Azov through which much Russian and Ukraine grain moves.

It appears Russian president Vladimir Putin is again looking for ways to retest the resolve of NATO and the new United States president Joe Biden to support Ukraine.

Ukraine is one of the world’s leading wheat and corn exporters. The tensions have not yet affected Ukraine’s grain movement and spring seeding continues under generally good weather. Winter-seeded crops including rapeseed are in good shape.

Washington imposed new sanctions against Russia over this provocation and its interference in America’s election but Biden has also offered a summit meeting with Putin.

Meanwhile, China has increased its military drills around Taiwan, including warplane incursions into the island country’s airspace.

China considers Taiwan to be part of China, a claim Taiwan rejects, particularly after China cracked down on Hong Kong in the past year.

The Biden administration wants to work with Japan, South Korea and others in the region to stand against China’s increasing aggressive stance in the South China Sea, and against Taiwan independence. But given the strong trade relationship all the countries have with China, the situation is delicate.

The situation has yet to affect trade but if the tensions escalate it could begin to test the market’s confidence, which has been upbeat on hopes that the roll out of COVID-19 vaccines would spark economic recovery.

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