Is rain on the way for the drought-plagued US southern Plains?
Dryness there – 76.7% of Kansas, the top wheat-growing state, is in drought, according to official data – has been a major boost to wheat prices, particularly in the US itself.
And ideas are not for any immediate relief.
“US hard red winter wheat production areas will receive very little rain over the next 7-10 days,” said Terry Reilly at Futures International.
However, “there is talk that US hard red winter wheat country will turn more active in late March into April with rain falling across Colorado to northern New Mexico into the western Great Lakes region and upper Midwest.
“This pattern change will also provide some rain for the dry areas of the south western Great Plains.”
‘Increased rain chances’
At WxRisk.com, David Tolleris, talking of jet stream patterns, said that “it means that the active and convoluted weather pattern will likely continue for the next 2 or 3 weeks --at least.
“While the pattern remains active and fairly wet for the west coast and Rockies as well as the east coast, it will remain very dry over the heart of the drought areas and the central and lower Plains.
However, there is “some indication that by the end of the month pattern will begin to change and a developing trough in the jet stream over the western one-third of the country may bring about even normal or above-normal rain for portions of the drought areas the lower Plains.
“The European weekly model does show significant change the pattern as we move into the beginning of April,” and the potential for “increased rain chances for the hard red winter wheat areas and especially into the Delta and the Gulf coast states”.
Of course, long-term forecasts in particular are of questionable accuracy.
And such rains would not be welcome in all areas, with the Delta states already sodden, hampering the application of sprays to counter weeds and pests encouraged by the rains, and potentially slowing seedings of the likes of corn too.
Still, with plenty of time for rain to perk up drought-tested winter wheat, the forecast was cause for investors to keep removing some risk premium from wheat prices.
Wheat futures for May shed 0.6% to $4.83 ½ a bushel in Chicago as of 08:50 UK time (03:50 Chicago time), falling back below its 20-day moving average, while Kansas City hard red winter wheat itself for May eased 0.3% to $5.18 ½ a bushel.
Minneapolis spring wheat extended its newly-rediscovered outperformance, in terms of easing 0.2% to $6.24 a bushel for May, defending its financial appeal to farmers sorting out spring sowings programmes.
Trade war talk
Another theme said to be live in financial markets, including ags, on Wednesday was that of potential trade wars, with the decision by President Donald Trump to sack Rex Tillerson as secretary of state viewed by some as a portent of enhanced trade tensions.
Mr Tillerson’s successor, Mike Pompeo, is seen as far less likely to stick up for free trade.
“Market chatter about US soybeans falling victim to the US China trade dispute continues,” said Tobin Gorey at Commonwealth Bank of Australia.
That said, prices of soybeans - and cotton, another big Chinese import from the US – fared relatively well.
New York cotton futures for May added 0.5% to 83.40 cents a pound, helped in fact by some worries over China’s own output this year.
“Producers in Xinjiang,” China’s top cotton-growing state, “are reportedly concerned regarding further subsidy payments, which have yet to be announced,” said Louis Rose at Rose Commodity Group.
Talk of US business
And, as for soybeans themselves, they added 0.2% to $10.50 ¾ a bushel in Chicago for May delivery, boosted by a further recovery in values of soymeal.
Soymeal – of which Argentina is the top exporter, making prices particularly sensitive to drought in the South American country – gained 1.0% to $379.10 a short ton.
While last week brought ideas that Argentina has enough soybeans to keep its crushers running, despite the prospect of a drought-hit soybean harvest, there are some ideas that farmers there are still keeping a firm grip on supplies, with (dollar denominated) crops offering a hedge against a depreciating peso.
Indeed, Terry Reilly at Futures International flagged talk of orders of US soymeal at Gul ports.
Furthermore, in an extra support for soybean prices, February US crush data due on Thursday from industry group Nopa are expected to be, at 149.2m bushels, record large for the month, up some 400,000 bushels year on year, if down from 163.1m bushels in January.
Battle for acres
Corn futures for May, meanwhile, eased by 0.3% to $3.90 ¾ a bushel, maintaining their position between rival grain wheat, and soybeans with which corn is engaged in a battle for prominence in farmers’ spring seeding programmes.
This will come to a head in two weeks’ time when the US Department of Agriculture unveils its annual briefing on US farmers’ spring sowings intentions, which is broadly seen as favouring soybeans.
Benson Quinn Commodities noted that a much-watched spread between new crop November soybean futures and December corn “was trading on that day at 2.57:1” on March 1, when the “producer survey for the prospective plant report was due”.
The ratio “traded as high as 2.59:1 during survey period”.
“The firmer beans to corn relationship at survey time favours big bean acres on the March 29 report,” the broker said.
However, with the ratio now back to 2.54, “does the retreat in this ratio shift acres back to corn? Could bean acres be overstated in this report?”