Demand and spring weather risk on for grain buyers

Grains are finally recovering a bit after their sharp decline following the USDA’s March 28 stocks and planting intentions report.

Brennan Taylor

FarmLead Breakfast Brief

Grains are finally recovering a bit after their sharp decline following the USDA’s March 28 stocks and planting intentions report. The bearish report dropped the market like a newborn baby giraffe coming out of the womb. This has eventually pushed some buyers to get back in the game. Particularly, while managed money (funds) liquidated a lot of their long positions in corn and soybeans, commercial end-users picked a fair amount of those contracts up. Nonetheless, it’s a “risk on” attitude as weather and demand are the variables currently being closely watched.

Specifically, up to a foot of snow could possibly fall in some parts of the Eastern U.S. cornbelt while cold temperatures slow the melt of the snow on both sides of the 49th parallel. North American farmers and traders aren’t the only ones concerned about weather implications though: a drier spring in southern Russia and Ukraine contrasts the wet weather in the U.K., France, Germany, and northern Russia and Ukraine. This comes at a time when the European Union wheat ending stocks are seen at a 35-year low of 9.5 million tonnes.

With markets lower than where they were a month ago, China bought one million tonnes of American soft red winter wheat late last week at a price of $330 per tonne, about $32 per tonne cheaper than domestic Chinese wheat prices (after tariffs). Issues of fusarium head blight in parts of the Chinese wheat belt has some analysts suggesting the Asian supernation’s estimated crop of 120 million tonnes isn’t all it’s cracked up to be. Keep in mind, China’s 2012 wheat imports, which was mostly feed-grade wheat, were the highest in eight years.

Staying in Asia, a bird flu scare is deterring consumers from eating poultry, implying lower feed demand in the world’s largest buyer of soybean meal. Already 21 people have been infected and a few have unfortunately passed away as a result. This is putting some downward pressure on the soybean/oilseed market. However, the World Health Organization has already pumped China’s tires for doing a good job of containing the virus via the slaughter of tens of thousands of chickens and closing live poultry markets. Even if McDonald’s has cut its McNuggets prices in half, you wouldn’t catch me dipping into any sweet’n’sour sauce if I was in China right now.

While the Asian market remains up in the air between Chinese demand questions, the weakening of the Japanese currency, and North Korea being the “too drunk guy” at the party, weather is on many minds in North America. Western Canadian farmers are just hoping the snow will melt so they can see some dirt but colder weather means another U.S. winter wheat freeze threat (Kansas and Oklahoma at the greatest risk). For a U.S. winter wheat crop that is at its worst start since 2002 (only 34 per cent rated good to excellent compared to 58 per cent this time last year), the longer Ol’ Man Winter sticks around, the bigger potential loss of production.

Brennan Turner is originally from Foam Lake, Sask., where his family started farming the land in the 1920s. After completing his degree in economics from Yale University and then playing some pro hockey, Mr. Turner spent some time working in finance before starting, a risk-free, transparent online grain marketplace. His weekly column is a summary of his free, daily market note, the FarmLead Breakfast Brief. He can be reached via email ( or phone (1-855-332-7653).

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