The Good: There was precious little in the way of good news today, but despite the drop in wheat prices, the U.S. reported strong shipments of wheat in the week ending on May 28th. A total of 499,353 tonnes were exported in the last week of May which marks the end of the crop year. There will be some shipments in the last three days of the month, but the total exports for the crop year to date hit 24.9 million tonnes with the shipments this week. Although the official accounting will take another week or so, the numbers are the highest since the 2017-18 crop year.
Markets are now clearly focussed on the 2020-21 crop year with harvest underway in the Southern Plains. USDA reported that 32 per cent of the Texas crop was in the bin with no harvest reported in Oklahoma. These numbers are likely a bit conservative as there are reports of cutting in southwestern Oklahoma. Harvest progress was good last week as hot, dry conditions helped dry down fields across the region. The harvest is expected to move into central Oklahoma by next week.
The Bad: There were a number of contenders for the bad news of the day, but the one that impacts all farmers is the strength of the Canadian dollar. The loonie moved over one cent higher today to close at 73.65 U.S. cents. This moves the loonie closer to the gap that occurred on March 9th, when the loonie dropped from 74.46 U.S. cents to 73.36 U.S. cents.
The fundamentals for the loonie are very weak with the lower oil prices and slow unthawing of restrictions due to COVID-19. Eventually the fundamentals will prevail, but the technical momentum is undeniable. Combine this with the current situation in the U.S., where riots are hampering the recovery of economic activity and the loonie doesn’t look that bad from a risk perspective. Unfortunately the stronger loonie pressures farm gate prices for Canadian grains and oilseeds.
The Ugly: The China – U.S. trade agreement was called into question today as the Chinese government has ordered COFCO and SinoGrain to stop purchases of U.S. grain and oilseeds. The Chinese government is still on the record that they will meet the phase one portion of the agreement, but it will be impossible if COFCO and SinoGrain do not quickly resume exports. This move certainly will pressure soybean prices in the U.S. and with 75 per cent of the crop already in the ground, the die is close to being cast.