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Weather Becoming Market Focus

For three-times-daily market reports from Don Bousquet and RNI, visit “ICE Futures Canada updates” at

Grain and oilseed futures at ICE Futures Canada in Winnipeg closed the week ended April 9 mainly lower. Canola saw small losses, undermined by slowing demand and the large available canola supplies still on-farm in Western Canada. Canola declined despite the fact that the U. S. soy complex was relatively steady and soybean oil was higher. Although the trade volumes were heavy, most of it was comprised of commodity funds and commercials, rolling their May contracts into the July futures contract. Otherwise, the trade was only routine exporter and crusher buying meeting commercial selling. Farmer selling was steady. Western barley futures ended the week mixed. The old crop fell on slow demand while the new crop rallied on concerns that barley production will fall in 2009.

U. S. soybean and corn markets were mixed despite the fact that the U. S. Department of Agriculture (USDA) issued a fairly positive supply/demand report for both. Soybeans were mixed as the old crop soared well above the US$10 per bushel level on strong export demand and dwindling supplies. The new crop declined modestly on the expectation for large production in 2009. U. S. corn futures dropped moderately despite exceptional demand. Heavy farmer selling continued at the $4/bu. level and profit-taking by speculators was also evident, trimming the market back.

U. S. wheat futures saw moderate to sharp losses as the continued sluggish export pace weighed on the markets. Ideas that the fast, large run-up in wheat prices – which saw values rise 75 cents per bushel in a little more than a week – was overdone also accounted for the losses. Giving some support to the markets were weather conditions on the U. S. Plains, with a freeze hitting the southern winter wheat crop and flooding in North Dakota likely to cut into spring wheat seeding.


USDA brought out its latest supply/demand reports and they contained some interest ing numbers but were really mainly a footnote to the March 31 USDA grain stocks reports. The reports were friendly for soybeans and corn and neutral for wheat.

Soybeans saw the friendliest report, as USDA lowered 2008-09 U. S. soybean ending stocks to 165 million bushels from 185 million in the March report, as the hectic pace of exports caused the revision down. Traders feel ultimately the ending stocks will come in at 145 million bushels, which is very tight and quite bullish. This will certainly push U. S. soybean futures up to the $10.50/bu. level. It will give some support to old-crop canola. However, the slowing demand for canola suggests the positive impact from a U. S. soy rally on canola prices will be muted.

Further encouraging a firmer tone in soybeans will be USDA lowering the Argentine soybean crop to 39 million tonnes from 43 million due to that country’s drought. This pulls down global 2008-09 soybean ending stocks to 45.8 million tonnes from 49.9 million.

The positive impact from these numbers will be felt in the new crop as it will keep beginning stocks low and mute the negative impact of the expected huge U. S. soybean crop in 2009.

For corn, USDA lowered the U. S. 2008-09 ending stocks estimate to 1.7 billion bushels from March’s 1.74 billion bushels. Stronger feed use than expected accounted for the decline. This is not overly tight, but will make the market more susceptible to the expected lower corn production in the U. S. in 2009.

Wheat numbers in the U. S. report were relatively neutral, as USDA forecast 2008-09 ending stocks at 696 million bushels, down from last month’s 712 million bushels. Higher feed use accounted for the drop in the stocks level.

However, a little more bearish for the wheat market was the raising of global ending stocks for 2008-09 to 158.1 million tonnes from 155.85 million tonnes.


Markets are shifting now to weather and its impact on production. Last Tuesday, April 7, a freeze occurred on the southern Plains which damaged the U. S. winter wheat crop. The impact won’t be known till later in the season, but traders estimate between 20 million and 90 million bushels were lost as a result of the cold, which affected states from Kansas south.

The negative impact of the flooding we have seen in North Dakota will also not be known until seeding time.

The other weather event being watched right now is the excessively cool and wet conditions in the Ohio Valley, southern Missouri and southern Illinois. Traditionally the corn crop is being planted in that area right now and the weather has delayed that planting.

Overall, analysts expect the corn crop planting to be delayed about one week in the U. S.

Right now most weather forecasters in the U. S. are calling for a wet, cool spring for the U. S. Midwest and a warm summer. Likewise the Canadian Prairies are expected to be wet this spring with a warm summer.

Some larger weather anomalies seem to be developing. The question of whether we will see an El Nińo event this year has appeared. That weather phenomenon usually causes palm oil production in Southeast Asia to decline and also results in disastrous droughts for the Australian wheat crop.

So far the great trade winds over Southeast Asia have started to slow and the Pacific Ocean in the area has started to warm. These are a precursor to El Nińo. We will know if this weather anomaly is developing by the end of May.


The other potential weather factor to be aware of, although there has been no sign of it, is drought for the U. S. Midwest. Many farmers are familiar with the 19-year drought cycle in the U. S. Midwest. This cycle has been recorded in nature for the last 800 years.

The longest time that has ever occurred between these Midwest droughts has been 23 years. The last major drought in the U. S. Midwest was in 1988. That means that the likelihood of drought in the U. S. Midwest either this year or next year is exceptionally high. In 1988, the drought did not start to appear in the markets until the third week of May and was confirmed as a major drought in the market by the middle of June.

– Don Bousquet is a well-known market analyst

and president of Resource News International (RNI), a Winnipeg company specializing in grain and commodity market reporting.

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