WESTERN PRODUCER — It has been a rough couple of weeks for grain markets as futures prices fell for several reasons, including expectations for continued wheat supply from the Black Sea regions and worries over the slow pace of American corn exports.
Chicago May soft wheat saw the biggest percentage decline in the two weeks between Feb. 23 and March 10, falling 9.5 percent. It would have been even lower but for a rally on March 10.
Minneapolis hard red spring wheat fell 8.6 percent over the same period while Chicago corn fell 6.37 percent.
Soybeans did better, falling only 1.3 percent, on the strength of the meal component that rose 1.7 percent.
But soy oil was under a lot of pressure, falling almost nine percent.
Canola, with its large oil content, fell about 5.5 percent.
Grain prices are falling because worries about global supply are less acute than last year.
Also, concern remains there will be further interest rate increases to cool inflation, which could push major economies into recession later in the year hurting demand.
On the supply side, market traders expected the Black Sea shipping corridor agreement set to expire March 18 will be extended again.
The agreement that allows Ukraine grain to be exported out of the Black Sea without Russian interference must be renewed every 120 days.
Russia has complained that it should get more credit for agreeing to the corridor, alleging that while its agriculture exports do not specifically face restrictions, other sanctions affecting banks, logistics and insurance interfere with its ability to ship grain and fertilizer.
However, its complaints might be just sabre rattling, as it has been able to ship huge amounts of wheat, which are undercutting other exporting countries.
If it did reject the agreement it would face a new round of international condemnation for denying Ukrainian grain to some of the world’s poorest countries.
As Russia’s wheat exports boom, European wheat exports are running slower than expected.
The wheat market is also well supplied by Australia. Its record harvest is getting bigger. Last week, the U.S. Department of Agriculture’s monthly supply and demand report raised the estimate of that crop by one million tonnes to 39 million.
Although there is lots of competition, Canada’s wheat export campaign is running at what must be a record or near record pace. As of week 31, Canada shipped 11.82 million tonnes of wheat.
Drought devastated the 2021-22 crop and exports stood at only 7.08 million tonnes at week 31 last year.
But we are also ahead of 2020-21’s 11.77 million tonnes, which was a big year for wheat exports.
And the five-year 2016-17 to 2020-21 average for week 31 is 9.72 million tonnes, so clearly today’s pace is exceptional.
The wheat market is also looking ahead to the crops planted last fall, to be harvested this summer.
Europe’s winter wheat enjoyed a mild winter. Although southern areas have been dry, overall crop condition reports are good.
In mid-February, Strategie Grains forecasted a soft wheat crop of 129.7 million tonnes, up from 125.6 million in the last harvest.
Russia’s winter wheat has come through the cold season in mostly satisfactory condition, according to the country’s Hydrometeorological Centre.
But other global wheat crops face challenges.
Ukraine’s farmers were able to plant only about 10.13 million wheat acres last fall, down from a pre-war 15.2 million.
India’s official winter wheat forecast is for 107 to 108 million tonnes. Last year at this time, it had a similar forecast but late season intense heat trimmed yields and the final tally was 102 million tonnes, causing the government to ban exports.
At the end of February this year, a forecast from India’s weather bureau said there was an “enhanced probability” of heat waves in March through May, raising worries for a repeat of last year’s crop problem.
The U.S. hard red winter crop is also still stressed.
As of March 5, the Kansas hard red winter wheat crop was 53 percent poor to very poor, 30 percent fair and only 17 percent good to excellent.
That is considerably worse than the March 6, 2022, report , which was considered pretty bad at the time.
As usual, spring rain will be critical.
The long-term precipitation forecast for Kansas and other parts of the southern Plains issued by the U.S. weather service in mid-February saw no strong indication for above or below normal rain in March or in the March-to-May period.
Turning to the demand picture, strong February job reports in the U.S. and Canada indicated economies are still running hot. That raises the likelihood of further interest rate increases to cool inflation.
