The levels of rain being talked about for the southern US Plains are beginning to approach biblical proportions.
“The updated midday GFS weather model is trending toward the European model from last night —much wetter in Oklahoma/Texas border area,” said Mike Zuzolo at Global Commodity Analytics.
What that means is that “the next 7 days could bring 10 inches of rain for this area if these models are correct”.
It also meant a rising tide of support for wheat futures.
Benson Quinn Commodities said: “Wheat is benefitting from continue concerns about quality and possibly production issues based on another round of heavy rains expected for northern Texas and much of Oklahoma.”
Rain later in wheat development process is not helpful, lowering quality rather than pumping up yields.
“Frequent rain will impact the US Plains for next 10 days, which will affect wheat quality and disease expansion,” said Terry Reilly at Country Futures.
‘Dryness will persist’
In fact, it wasn’t just fears of too much rain that was helping wheat futures, but worries of too little too, in parts of Canada and Russia – the latter, of course, having a history of weather worries at this time of year which send prices soaring.
“Southern Russia and western Canada dryness will persist for the foreseeable future, although extended models in both areas are not as dire as yesterday,” said Richard Feltes at broker RJ O’Brien.
“Concerns about the drier weather profile for portions of southern Russian and dry conditions in western Canada are growing,” said Benson Quinn Commodities.
‘Producers are assessing damage’
At Country Futures, Darrell Holaday, also flagging “concern about dry conditions in Western Canada that could impact their spring wheat crop”, said that much of this worry appeared “premature”.
A crop report from Saskatchewan, Canada’s top growing province, didn’t appear to show too much alarm, saying that while some areas “are hoping for rain to recharge the top soil that is getting too dry, others “have reported wet conditions resulting in machinery getting stuck and some access roads being impassable”.
The briefing – which showed Saskatchewan spring sowing were 64% complete, up from an average of 24% for the time of year – actually seemed to show more farmer concerns over low temperatures.
“Cool dry weather has delayed germination and crop development in many areas. Frost was reported in many areas and producers are assessing damage at this time,” the officials said
Whatever, coming when markets had at the start of the month allowed little risk premium for weather, investors felt comfortable about pumping a little more in, despite US export sales data that was less than impressive.
While net sales of 74,400 tonnes for 2014-15 were fine, given that the season ends in less than two weeks, sales of 128,200 tonnes for 2015-16 looked sparse.
The total sold ahead for next season by the US is 3.17m tonnes, down from 3.54m tonnes a year ago – although that was hardly a special number itself.
Indeed, as of the mid-May 2013, forward sales for the next season were 4.8m tonnes
Soft red winter wheat futures for July closed u p1.6% at $5.22 a bushel in Chicago, closing above their 100-day moving average for only the second time in four months, and with some other technical signs beginning to look more positive too.
Kansas City hard red winter wheat futures for July ended above their 100-day moving average for the first time in four months, in ending up 1.9% at $5.55 Ѕ a bushel – hard red winter wheat being the type grown in the sodden southern Plains.
Spring wheat for July rose by 1.1% to $5.74 ј a bushel in Minneapolis, and indication perhaps that the Canadian weather worries are the weakest of the bunch at the moment.
In Europe, Paris wheat outperformed, adding 2.3% to E186.00 a tonne for December, retaking its 50-day moving average, but lacking quite the momentum to breaking above its 200-day moving average at about 186.25 a tonne.
EU weekly wheat export data, at 647,000 tonnes, were decent, and took the total for 2014-15 to 29.1m tonnes, up from 25.9m tonnes a year ago.
London wheat for November jumped 2.0% to £124.00 a tonne.
The support spread to other grains too, with July corn ending up 1.2% at $3.65 a bushel, back above its 10-day and 20-day moving averages.
(That said, its discount to wheat was the largest in four months, on a closing basis.)
It also helped that the “export sales report this morning was supportive for corn at 812,600 tonnes” for this season, Country Futures’ Darrell Holaday noted.
At CHS Hedging, Joe Lardy said that “this week’s corn sales marked the fifth straight week over 1m tonnes.
“Commitments are at 91% of the USDA export number” for the whole 2014-15, meaning that “only 250,000 tonnes per week will be needed going forward” to meet the full-season forecast.
‘Sales did not impress’
But for soybeans, the US export sales data were less impressive, at 165,500 tonnes for old crop and 77,500 tonnes for 2015-16.
“New crop sales did not impress,” said Benson Quinn Commodities.
Indeed, at 4.49m tonnes, forward US export sales so far for next season are well down on the equivalent last year of 8.57m tonnes.
Soybeans for July ended down 0.5% at $9.38 Ѕ a bushel.
It was in fact Winnipeg canola that stood out in oilseeds, gaining 0.9% to Can$462.60 a tonne, helped by the Canada dryness fears, but also by an official estimate of the country’s stocks of the rapeseed variant dropping to their lowest in 18 years.
‘Unable to contain the disease’
Gains were harder to come by in soft commodities, although cocoafutures did return to winning ways, rising 1.2% to $3,163 a tonne for July delivery, the best finish for a spot contract in New York for seven months.
Ecobank issued a reminder of poor prospects for Ghanian production, adding that the “slump appears to have been caused by several factors, primarily the impact of an outbreak of black pod disease, which followed heavy rainfall in the months leading up to the main crop.
“Farmers were unable to contain the disease because of a lack of fungicides, while output was constrained by the late delivery of fertilisers, distributed in August, which was too late to affect the main crop.”
But coffee slumped, as reported elsewhere on Agrimoney.com, while cotton ended down 0.7% at 63.73 cents a pound for July delivery.
US export sales last week weren’t bad, at 59,300 running bales for 2014-15, and actual exports huge, at 343,000 running bales.
Louis Rose at the Rose report said: “Overall, we take today’s export data to be supportive, in that it casts further doubt on the USDA’s 10.7m-bale US export projection” for 2014-15 – ie, that actual shipments will beat the forecast.
And as an extra support, there was talk of Indian farmer sowings of cotton for 2015-16 dropping potentially 10% year on year from the record 13.0m hectares.
‘Good mix of rain and sunshine’
However, weather for much of the US cotton belt (bar Texas) is not looking too bad
“US south eastern states will experience a good mix of rain and sunshine during the next two weeks,” said Terry Reilly at Futures International.
“Some dryness pockets will remain, but no area is expected to become critically dry.
US Delta weather will be favourably mixed with rain and sunshine over the next two weeks.”
(Source – http://www.agrimoney.com/marketreport/wheat-futures-rise-as-canada-russia-weather-fears-take-hold–3143.html)