Grain War between the United States and Russia

By Brennen Turner, FarmLead


Grain markets entered the month of June with weather premium waning a bit before we saw some below-expected crop ratings out from the U.S.D.A. add some bullishness back in the market.
The U.S.D.A.’s crop progress report showed us that just 65 per cent of the U.S. corn crop is rated in good-to-excellent (G/E) condition, below the 70 per cent the market was expecting, 72 per cent G/E last year, and the lowest since 2013.
This can be considered bullish, as could the recent wheat conditions. U.S. winter wheat G/E ratings dropped down to 50 per cent, (well below last year’s 63 per cent at this time of year), and U.S. spring wheat G/E ratings came in at 62 per cent versus 79 per cent a year ago.
As such, concern of yield and quality potential is becoming a war between bears and bulls.
There are planting concerns in Western Canada but there is some continual progress that is keeping bullish challenges in check. Mainly this is because a fair amount of supply still in the pipeline though. Case in point, while we’ve seen a bit of strength in the cash feed barley market, there’s some that think that there isn’t actually a lot of poor quality cereals (including spring-combined stuff) in the pipeline. This is a wrong assessment though because otherwise we would’ve already seen more than the below-average increase in spring feed grain prices.
However, this was not the case because if it was, we would’ve already had a lot more strength. If prices do rise, it will be driven by production concerns in 3Q2017 (July, August, & September), not the current pipeline of supply.
AccuWeather says though that there’s some hot and dry weather developing across Poland, Ukraine, Belarus, and other Baltic State, which is something we’ll have to keep a close eye on, given that especially Ukraine is the world’s No. 4 exporter of corn and No. 6 exporter of wheat!
It’s also worth noting that UkrAgroConsult is timestamping a 60 per cent increase in rapeseed exports, thanks to a 70 per cent increase in production this year.
Next door in Russia, according to IKAR, wheat exports are now sitting at 25.3 million tonnes for the 2016/17 marketing year, which is a new record, but is expected to be broken by 2017/18’s forecast from the U.S.D.A. of 28 million tonnes.
With European exports still finding it tough to be competitive after a smaller year of production, it seems to be that the title for top wheat exporter next week will be battled out between Russia and America (ironic given some of the geopolitical risk). Perhaps we can call this battle the Cold Wheat War.