Hopefully, “we have seen the last of the minus 20 below temperatures - at least one can hope,” said Mike Mawdsley in Iowa.
“That’s just too brutal.”
In fact, it got as low as minus 27 degrees Fahrenheit in Fort Dodge in central Iowa, and minus 31 (minus 235 Celsius) not far away in Denison, prompting the National Weather Service to tweet: “Someone tell Denison and Fort Dodge this is not a competition you want to come in first in”.
But as to what damage winter storm Uri caused to US winter wheat, with the bigger growing areas further south in the likes of Kansas and Oklahoma the bigger issues, well, there remains a bit of scepticism in markets caught out previously by exaggerated winterkill warnings.
‘Not everyone is so convinced’
“Many in the market fear that those very cold temperatures will have killed enough US winter wheat crop to tighten 2021 supply,” said Tobin Gorey at Commonwealth Bank of Australia.
However, “not everyone is quite so convinced that the losses will be large.
“Snow cover protected many of these crops ahead of the weekend. And that cover improved over the weekend ahead of the coldest temperatures.
“The actual losses will remain uncertain until the spring when growers will be able to see which plants return from winter dormancy.”
Agritel said that “it will be necessary to wait several days, even weeks, to measure whether the frost damage is really present”.
Benson Quinn Commodities added that how crops “come out will be unknown till the first national ratings report on April 5”, ie when the US Department of Agriculture restarts its full weekly crop progress reports.
The wheat market also received some disappointing news in the form of the result of the Algerian wheat tender, which ended up with a purchase reported at just 30,000-60,000 tonnes, down from more than 600,000 tonnes at the previous tender, late last month.
The small purchase was attributed variously to higher prices - with Algeria’s OAIC reportedly paying $320-321 per tonne this time on a C&F basis, up from $312-313 per tonne last time – and to logistical issues, with the authority asking for delivery to two smaller ports.
Agritel, noting that Algeria specified “port destinations that can only accommodate small boats”, said that the volumes bought “should be low and the origin probably French”.
Chicago soft red winter wheat, in good old turnaround Tuesday style, shed 1.0% to $6.54 ¼ a bushel for May delivery, as of 10:30 UK time (04:30 Chicago time).
Kansas City hard red winter wheat for May stood down 1.0% too, at $6.36 ¾ a bushel.
‘Halting barges and trains’
Not that a turnaround Tuesday was compulsory.
Corn futures for March, having hung in the last session on wheat’s coattails, managed to hold ground gained, and edge 0.1% higher to $5.53 a bushel.
Benson Quinn Commodities talked of support from “both US and South American weather”.
In the US, Uri “has frozen the river system thereby halting barges and trains from moving grain to the export markets.
“The forecasts could keep the river system hampered till early March which will see the export pipeline tighten.”
At AgriVisor, Karl Setzer said that “country movement is practically non-existent as bitter cold temperatures and heavy snows have impacted nearly every state of the Corn Belt and beyond.
“Basis incentives have been posted for quick ship deliveries as a result,” although these are “failing to generate much interest, especially with the majority of old crop bushels already marketed”.
‘Lower yields than anticipated’
As for South American weather “rains are delaying soybean harvest and corn planting in central and northern Brazil, while a dry forecast for southern Brazil and Argentina is threatening yield potential”, Benson Quinn Commodities said.
In fact, in Brazil, “the main concern now is the persistent wet weather as harvest gets underway” for soybeans, said Dr Michael Cordonnier at Soybean and Corn Advisor, the respected South America crop expert.
“The forecast is calling for a lot of rain in the central and northern areas as more of the soybeans reach harvest maturity.”
For soybeans, “there are concerns that the wet weather could result in poorer quality seed and lower yields than anticipated”, with “problems reported especially in the state of Parana”.
‘One of the latest in recent memory’
For balance, Agrimoney will add that Mr Setzer reported that “initial soybean yields in Brazil were above expectations given the weather the crop was subjected to, and these have continued to rise.
“Initial soybean yields in Brazil were ranging from 60-65 bushels per acre, but in some cases, these have increased to range from 70-75 bushels per acre. This is considerably higher than expected.”
But back to corn, and the slow progress of the soybean harvest means slowing seedings of the follow-on safrinha corn crop.
“Given more wet weather in the forecast, the 2020-21 safrinha corn may end up being one of the latest planted in recent memory,” Dr Cordonnier said, with late sowings risking falling foul of seasonally dry weather in Mato Grosso, and frost in Parana.
Still, a negative demand story should be added into the corn price discovery mix too, in the form of apparent cutbacks in US ethanol output in the face of Uri, as producers turn a profit on the natural gas they use as their prime energy source.
CHS Hedging said it was “hearing ethanol plants have seen a decline in ethanol production as they look to sell their natural gas inventory, taking advantage of the rise in values from the cold temperatures across the US”.
At Futures International, Terry Reilly said too that “we are hearing some ethanol plants are selling natural gas back to the grid and closing for a while.
“Some of them made a profit by doing this. With the spike in natural gas prices, it might be too expensive to run some of the US ethanol plants.”
Mr Reilly added that “several ag-related processing plants are experiencing natural gas problems. Sourcing the product from Texas to the Great Lakes has become a real problem”.
‘Strong vegoil prices’
As for soybean futures, they also showed modest gains, adding 0.2% to $13.87 ½ a bushel for March.
Besides South America weather worries, the oilseed was helped yet again by buoyant soyoil, which rose by 0.6% for March to 47.57 cents a pound, setting (just) a fresh seven-year high for a spot contract.
Mr Reilly noted support from “strong global vegetable oil prices”, with palm oil extending its gains too in Kuala Lumpur, adding 2.6% to 3,627 ringgit a tonne for May delivery, in turn helped by worries over Malaysian production, at a time when exports appear to be recovering from a dismal January.
‘Likely loss of acres’
Meanwhile, in New York, cotton futures for May remained upward bound, but facing a struggle to secure the 90 cents-a-pound mark, regained only fleetingly in the last session.
The contract added 0.4% to 89.97 cents a pound in early trading.
“The market remains focused on the likely loss of [cotton] acres to feed crops in season 2021” in spring sowings plans in the likes of the US, Mr Gorey said.
“However, should the cotton price keep on rising at this rate, there may not be much of a loss,” with the elevated values rekindling producers’ love for the fibre.
Louis Rose at Rose Commodity Group talked of cotton gaining “support from grains and oilseeds and (probably) from continued trade and spec rolling into May” futures, from the spot March lot, for which expiry is some three weeks away.