CNS Canada — Wheat futures in the U.S. kicked off the week on a high note, following a weekend of adverse weather in key growing regions.
That may provide a short-lived boost to cash prices in Canada, though the market has its own weather watch.
Chicago Board of Trade wheat futures on Monday advanced close to 24 cents per bushel in the July contract, moving to $4.56, while Kansas City wheat gained more than 28 cents, closing at $4.6575 (all figures US$).
Snow, storms and two major freeze events took a heavy toll on crops in parts of eastern Colorado, Kansas, Nebraska, and areas of Oklahoma, said Terry Reilly, senior commodity analyst at Futures International.
“Our initial assessment of it is we’re definitely going to see some damage to the U.S. hard red winter wheat crop,” Reilly added.
“And then localized flooding across the Midwestern states puts some of the soft white winter wheat crop under water.”
If weather continues to pose a threat, K.C. wheat could advance to $4.90, basis the July contract, while Chicago wheat has the potential to move to $4.80, Reilly said.
“That’s the market that everyone has shifted focus on, at least early this week.”
Strength in the U.S. wheat market helps already-firm Canadian cash prices, though values in the country may not keep pace to the same extent.
“Certainly, anytime you get a run-up in the futures it’ll help cash prices up here a little bit,” said Jonathon Driedger, senior market analyst at FarmLink Marketing.
“Which isn’t to say that it doesn’t help cash prices, but maybe that we lag a little bit.”
Cash prices in Western Canada are grounded by fundamentals, while technical features push futures higher, he added.
“There is an element of fund short-covering and that adds a little bit of ‘juice,’ if you will, to the market,” Driedger said.
All that said, there is a lot of wheat, globally, and Canada and the U.S. are expected to carry out large stockpiles.
Markets for the commodity are also competitive.
“That’s kind of the counter balance to some of these other factors that have maybe kind of put a pin in the market and helped firm up some of these prices,” Driedger said.
But cash prices in Western Canada are also gathering strength from independent factors.
A sharply lower Canadian dollar is one bullish feature, while concern about planting in the country keeps values supported.
“Fundamentally, we’ll see what the weather throws at us as we go forward.”
— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow her at @jade_markus on Twitter.