The Good: Spring wheat staged a rally today, which helped bring the September contract jump up 11.25 cents per bushel to close at US$7.4750 per bushel. The important fact about today’s rally was that there was limited support from Chicago and Kansas City wheat contracts. Kansas City had a very bad day and closed down two cents per bushel, while Chicago was up six to seven cents per bushel. The spring wheat contract was supported by the dry conditions in North Dakota and the mostly dry weather forecast for the next two weeks.
The Bad: The safrinha corn crop in Brazil is in big trouble this year as the forecast calls for dry conditions and the crops are already under significant stress. MarketsFarm has dropped Brazilian corn production to 101 million tonnes, which is down one million tonnes from last year. The USDA will have to pull their estimates lower in the coming months as their current production estimate is a whopping 109 million tonnes. The corn harvest is underway in Argentina with a 46 million tonne crop forecast by MarketsFarm. This pushes South American production down by 9.5 million tonnes from last year. This will increase the dependence of global costumers on U.S. corn through the remainder of the crop year.
The Ugly: Another week and another ugly drought monitor map in the Northern Plains. Virtually all of North Dakota and eastern Montana are in extreme drought as the spring planting season is in full swing. The market decided to add a bit of a premium into spring wheat today because of the continuing dry weather. Note to the market: the drought doesn’t stop at the border.