The Good: The USDA report certainly confirmed the corn sales of the past week, with a total of 7.437 million tonnes sold to China and other countries. To gather some perspective on that number, the projected exports of Canadian peas and barley this year are expected to be only 7.3 million tonnes for the entire crop year. I would argue that the most bullish number was not the corn number, but the export sales were quite unexpected. The U.S. sold 823,000 tonnes of soybeans for the old crop year and 633,000 tonnes of new crop beans. If anyone thought that soybean sales for old crop positions were over because China is now focussing on Brazil for supplies, you forgot about the other global consumers of soybeans. Chinese purchasing of soybeans has moved to new crop positions which has pushed the new crop sales to a new record for this time of year. Remember that Chinese buying in the September through December is unlikely to be limited to soybeans. Canola new crop bids look attractive, but they may be undervalued relative to demand.
The Bad: The wheat market seems stuck in a rut as nearby March spring wheat futures were down by three cents per bushel which erased a portion of yesterday’s gains. Meanwhile, North America shipped over 450,000 tonnes of spring wheat (U.S. and Canada) during the past week. Spring wheat exports continue to be strong, especially in Canada, where exports are running 2.2 million tonnes ahead of the past year. U.S. spring wheat exports are just slightly ahead of last year’s levels.
The Ugly: Speaking of spring wheat, the markets are still ignoring a very large elephant in the room which is the drought in the Northern Plains. Nearly all of the spring wheat growing areas in the region are in moderate to severe drought. What could go wrong with this year’s crop? I think that this situation is worth at least a little weather premium for spring wheat.