Bears and bulls fighting it out in world markets

By Brennan Turner, President and CEO of FarmLead

Grain markets moved past the Easter holiday weekend seeing continued battles between bearish supply and bullish headlines of “it’s too wet”.  In North America, rain has stalled planting progress but is considered generally good for soil moisture conditions, albeit is still perking up the bulls attention to help rally things in corn. Some analysts have similar thoughts for spring wheat market as wetness in Western Canada and parts of North Dakota have them optimistic we’ll see bit of pick-up ahead of drills hitting the fields. However, the AgCanada is expecting Canadian wheat carryout to top 7.3 million tonnes this year and 6.2 million by the end of 2017/18. Accordingly, Western Canadian wheat prices may continue to be pressured, but the wet weather and likely small area planted to wheat in 2017 will help support new crop values to the upside.
Conversely, across the pond, Strategie Grains thinks that the European Union will hold only 10.1M tonnes of wheat at the end of this marketing year, down 37 per cent year-over-year. Thus, after a smaller 2016/17 crop, decent demand, and a bit-more-drier-than-you’d-like start to the 2017/18 crop, Strategie is feeling a bit more bullish on the cereal. Thinking more global though, the April W.A.S.D.E. report showed us that global carryout for wheat was raised to a record 252.3 million tonnes (+4.4 year-over-year). Elsewhere, corn inventories were increased to end the 2016/17 marketing year at a record 223 million tonnes (+5.3 per cent YoY) while soybeans carryout came in 3.5 million tonnes above expectations at 87.4 million (+13 per cent YoY).
In the U.S., 2016/17 carryout was unchanged at 2.32 billion bushels (nearly matching market expectations but 34 per cent higher year-over-year) as ethanol use was expanded by 50 million bushels but feed demand dropped by the same amount, keeping things even. American soybean ending stocks for this year were raised by 20 million from last month to 445 million bushels, which was near trade expectations and is up 126 per cent from 2015/16’s year end.
On wheat, ending stocks came in higher than last month and above expectations at 1.16 billion bushels (+19 per cent YoY), mainly because feed use was dropped by 35 million bushels.
Overall, the bulls are trying to keep things interesting, pounding the “wet” sentiment as much as possible, which is helping rally markets. On April 21 we’ll get the StatsCan seeding intentions estimates and May 10 will bring the first forecasts of the 2017/18 crop year from the U.S.D.A., but until then it’s going to be all about the weather. There’s always some challenges to getting the next crop out of the ground, it’s just a matter of how much the speculators want to support the bullish factors.