The Good: Wheat markets were down in the overnight session and there was every sign that they would push to the downside during today’s trading session. The weather on the weekend brought very timely rains to the HRW regions of the U.S., but the market felt that the potential improvement in the crop was already priced into the market last week. At the same time, the rainfall forecast for the Canadian Prairies and Northern Plains in the U.S. remain dry over the next two weeks. Spring wheat planting in the Northern Plains should begin by the end of the month in parts of South Dakota. Despite spring wheat futures moving up five cents per bushel, the nearby contract is still at the lower end of the trading range.
The Bad: The U.S. dollar index rose by 0.17 per cent to 91.833 points in today’s trading session. The U.S. dollar has been gaining some momentum since posting recent lows in early January. The dollar index retreated last week, but has rallied over the past two trading sessions. A rally back to the recent highs near the 92.5 point level would open up a move to the 93 to 93.5 point range. The problem with the higher U.S. dollar is that commodities are priced in U.S. dollars which pressures prices downwards. It is very hard for wheat, corn or soybeans to rally with a stronger U.S. dollar. The good news is that the Canadian dollar usually weakens when the U.S. dollar is strong which improves basis levels for Canadian grains.
The Ugly: Corn planting in Mato Grosso hit the 88 per cent mark last week, which is well behind normal of 98 per cent complete. The last 12 per cent of the crop will have to be planted about two months later than the optimal planting date for corn. Corn production in South America will be challenged this year as lower yields in the winter (safrinha) crop offset the increase in acreage.