US wheat futures focused on the weather last week, with forecasts for rain initially pushing wheat futures down.
Then, as the amounts of rain being forecast were reduced, the market rallied.
That all changed again on Friday night as the rain began to fall.
The problem for winter wheat is the crop is in very poor shape in the key state of Kansas, and it will take much more than one rainfall event to restore the crop back to a condition that can generate average, or trendline yields.
That means the market is likely to fluctuate depending on what the forecasts are suggesting for follow-up rains. One view might be that the crop can’t get any worse, with any rain able to see condition ratings remain on hold or improve over time.
For corn and spring wheat, the issue has been delays to planting from cold, wet conditions. The flipside is that farmers now have the ability to plant large acreages quickly. There may be an example of that this week, with expectations of improved conditions allowing tractors to begin moving.
In the meantime, one has to roll one’s eyes at the Australia grain market. Reports last week were suggesting that sorghum was flowing out of the country to China. At the same time, trucks delivering sorghum to port were backloading with South Australian barley to feed the domestic market in Queensland.
There is also a suggestion that cargoes of US sorghum, unable to find a home in China, may be imported into Australia as supplies of grain in northern consumptive markets continue to erode. So, while grain is being exported from northern cropping zones, other grain is being shipped in to meet domestic needs. It shows how political games, this time being played by China and the US, can impact local grain markets.
It is not only now that the grain market in Australia seems to be out of balance. There are many occasions where grain prices from southern export regions seem to be too low, and certainly the cheapest in the country, with large differences from one port zone to another neighbouring zone, with little rhyme nor reason.
This smacks of some degree of market failure as a result of the way the supposedly deregulated grain market has been able to evolve over the last decade.
While there will always be anomalies in grain prices around the country because of the distinct port zones that growers can’t easily shift between, and the timing of shipments and export sales from various port zones, some of the price discrepancies we see, and some of the grain flows we see, seem odd at times.
