Agri-commodity outlook: Markets at the mercy of weather, and volatility increases
As the US remains cold and below zero, winter wheat remains a concern; spring wheat planting and development in the US and Canada will be delayed, reported the CRM Agri team.
Furthermore, they noted a lack of rainfall in the US with minimal precipitation seen in long-term forecasts. That kind of weather pattern drove all Chicago and global grain markets higher again on Wednesday [April 21], they said.
Weather market, volatility
Summing up developments for us, Peter Collier, market analyst, CRM Agri, remarked: “We are currently in the middle of a strong spring weather market, with increased volatility due to current season tight markets. Although there is plenty of time for spring crops to get planted and needed rainfall to arrive, markets are already pricing in the potential for crop loss.
"While there is the potential for conditions to deteriorate, pushing markets still higher, given that the market support is built upon speculation for harvest crop loss, the potential for a price correction is also increasing. Markets are at the mercy of weather, and with current season tightness, the bulls are pointing to the price highs recorded almost a decade ago, while the bears are counting on increased area and relatively kind weather.”
In terms of the status of the corn crop in Argentina, harvesting had reached the 14.2% mark by mid-week, well behind average, said the analysts. “Although late increases in rainfall increased confidence in the crop, it has delayed the harvest.”
The Rosario Grains Exchange, though, is estimating the country's 2020/21 corn crop at 50MT, up from 48.5MT in a previous estimate due to better yields due to that rainfall.
Corn production in Brazil remains a concern, said the analysts. “Large areas of Safrinha corn production remain dry, but there is now rainfall forecast over the more northern regions.”
Chinese corn demand
Meanwhile, a recent USDA publication forecasts China’s 21/22 corn imports at 15MT. Market signals are encouraging additional domestic production over MY20/21 levels.
That outlook estimates MY20/21 corn imports at a record 28MT. The increase from past estimates is due to continued feed demand and a supply deficit that supports restocking of reserves.
CRM Agri reviewed the implications of this month's WASDE reported in a blog post.
Oilseeds
Looking at output in Argentina, the US Department of Agriculture (USDA), in a report published earlier this month, revised its production estimate for soybeans down 2.5 million metric tons (MMT) to 45 MMT on prolonged dry conditions in northwestern Bueno Aires and Entre Rios Provinces.
Oilseed rape markets continue to be well supported and pushing significantly higher with August Paris rapeseed futures breaching €500/T, said CRM Agri.
“In France, the prospect for rapeseed production is falling, following pest damage and the recent frosts. While in Poland, there are early signs of declining soil moisture. In the UK, and following the reduced planted area and beetle damage, the size of the 2021 harvest could well fall below 1MT.”
With EU27 & UK supply looking tight for next season, imports from Ukraine, Canada and Australia will be key yet again for next season, they forecast.
While crop prospects in Ukraine remain confidence inspiring, and planting conditions in Australia are favorable, conditions for oilseed rape in Canada are causing concern. “The dry and cold conditions in Canada pose a risk for yield, with later planted crops in Canada at risk of flowering in the summer heat.”
