The Minneapolis wheat futures market cooled recently but could regain strength if it remains hot and dry in Western Canada and if a survey of American spring wheat fields finds more damage than expected.
Crop scouts on the Wheat Quality Council U.S. spring wheat tour are expected to report on that crop July 27, after Western Producer deadlines.
On July 24, the United States Department of Agriculture said 34 percent of the spring wheat crop was in good to excellent condition, unchanged from the week before. Last year, 70 percent of the crop was in the top two categories.
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Intense heat was forecast over the region this week, but analysts said the crop was approaching maturity and not much more damage could be done. We’ll see what the crop scouts think of that.
The drought and heat has also taken a toll on American barley and oats crops.
The recent intense heat burned crops in Western Canada too. At the start of this week, Saskatchewan Agriculture said 80 percent of fields were short or very short of moisture.
Some areas received welcome showers July 24 but more will be needed to prevent more yield damage.
Wheat price support could also come from Australia if dry conditions persist there.
And although some regions of Argentina received light rain recently, the grain exchange there has reduced its forecast of wheat seeded area to 13.5 million acres due to a dry seeding season. That is up from last year’s 12.1 million, but down from 2004-05’s 15 million acres.
The July USDA world supply and demand report was the source of some of the weakness in Minneapolis. It raised its world wheat production forecast and the outlook for 2006-07 world ending stocks. Part of the reason was an upward revision in Russia and Ukraine’s crops, which apparently were not as badly damaged as expected.
But the biggest change was in USDA’s China wheat crop outlook, which it increased to 105 million tonnes from 97.5 million. Reaction to that increase was perhaps overblown. In recent years, China has rarely been a significant importer and although tantalizing in its potential, was not expected to import much this year.
The spotlight could just as easily have been put on USDA’s numbers for the traditional exporters, the U.S., European Union, Australia, Canada and Argentina. Their production and ending stocks were slightly lowered from the June report and are well down from last year, indicating good support for wheat prices for the coming year.
