Bearish News Dominate Wheat to Start June
Wheat markets pulled back to start the month of June thanks to catch-up planting, prospects of Ukrainian supply finally making its way to market and a potentially third consecutive bumper wheat crop in Australia. Adding to the bearish headlines are some better-than-expected yields from the U.S. Southern Plains winter wheat harvest (but if we’re being honest with each other, the first few fields to get cut usually are above-average anyways). While most North American farmers are still just trying to get the crop, there continues to be lots of volatility in the market, as traders try to interpret seeding pace, weather and geopolitical factors.
On the global spectrum for wheat, all eyes continue to be on Ukraine and the grain basically being held hostage by Russia. There have been some positive discussions this week to get things moving, with reports that Russia would be open to moving Ukrainian grain through Belarus, given the water around the former’s port positions are mined. On the flipside, SovEcon raised their projections for Russian 2022/23 wheat exports to a record level of 42.3 MMT. Also supporting the stronger bearish narrative this past week was India, which showed 1.13 MMT of wheat exports in May, only slightly down from the record 1.46 MMT shipped in April (and despite India supposedly banning wheat exports to countries not in need!).
In the Land Down Undaa, good rains across the country-continent and record prices have propelled Aussie producers to plant a record-high 35.7M acres of wheat on their paddocks, up about 3% year-over-year. While in-season growing conditions over the next 4 -5 months will have the final say, IKON Commodities is estimating a crop of 35 MMT, near last year’s harvest of 36.3 MMT, a new record. For context, the USDA is currently estimating this year’s Aussie wheat harvest at just 30 MMT, so of course the market took this huge harvest potential as bearish. Bottom line though, it’s looking more likely than not that Australia will produce at least 30 MMT of wheat for its 3rd straight year (the average is a little more than 24.5 MMT!).
Coming back to North America, the market’s focus on Plant 2022 continues to teeter between improving conditions in the Midwest and delayed operations in the U.S. Northern Plains and eastern Canadian Prairies. As of last Monday’s USDA crop progress report, just 56% of planned corn, 23% of soybeans, and less than 50% of the spring wheat crop had been seeded. With water still in the fields in places, there’s speculation that 1 – 1.5M acres of corn could be lost in the U.S. Northern Plains, but there also lots of buzz that at least half this acreage could be made up in the Corn Belt.
In Western Canada, Alberta and western Saskatchewan continue to be the envy of farmers east of them. As of this past week, 95% of fields in the Wild Rose province had been seeded, in-line w/ the 5-year avg. Southwestern, west-central and northwestern Saskatchewan are also all above 93% complete, whereas farmers in Eastern Saskatchewan are 50% - 65% complete. But those that have it worst are in Manitoba where the crop report last Monday suggested just 40% of the crop was in the ground, less than half of the 90% completion rate usual for the last days of May / start of June.
While the bearish headlines dominated the trade this week, we are still a few months from any crop being in the bin. With persistent geopolitical issues, a fairly-delayed start in some areas, and drought still a factor in parts of North and South America, bullishness factors remain for the markets to consider. As I suggested would happen in last week’s column, this week brought enough headwinds to prompt the selling. We could see a few more days of it before the focus turns to crop conditions and ratings throughout June.
Founder | Combyne Ag