Mecardo Analysis - US Farmers might need hovercrafts to seed
- By: "Farm Tender" News
- Cattle News
- May 21, 2019
- 501 views
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This article is bought to you by Extend Security.
By Andrew Whitelaw | Source: USDA, CME, ASX.
The Bureau of Meteorology have forecast large parts of Australia to be dry over the June to August period. It is quite the opposite if you spin the globe around to the US. The planting conditions in the US have had some big impacts on our pricing.
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The last week has seen an 8% rally in December CBOT wheat futures, which has assisted the local ASX gain ground after its fall on the back of rains in early May. Whilst ASX has risen, basis has fallen close to its low point for the year (figure 1). This shows us that the gains are largely because of flow on effect from overseas conditions.
Huge tracts of the US have been inundated with rainfall in recent weeks to the point of making progress with planting difficult and potentially causing damage to already planted acres. The big concerns at present relate to the corn and soybeans which are well behind the average pace.
* Corn 49% vs five-year average of 80%
* Soybeans 19% vs five-year average of 47%
Due to the later planting window of soybeans it is likely that additional acreage will be set to the oilseed, which races some potential concerns in light of tariff measures and decreased soybeanmeal demand due to ASF.
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The picture with wheat is not quite as bleak at present, however any major issues to corn will result in continued uplifts. The spring wheat crop is 70% planted, placing it at the middle of the range for this point in the season.
The condition of the winter wheat crop is holding up well with 66% of the crop considered to be good/excellent (figure 2), the highest for the past half decade. The continued rain could however lead to deterioration of the crop.
Key points
* Corn planting has been hampered by wet weather with only 49% planted versus a five-year average of 80%
* Spring wheat planting is in the middle of the range but any impact to corn potential will flow onto wheat.
* The winter wheat crop is in good condition at 66% good to excellent.
What does this mean?
We live in interesting times at present. The conditions in the US are poor for corn, which can and is resulting in a flow on effect to wheat.
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We have seen issues raise their heads in recent years during May-July which have caused large speculative driven rallies, which have then come undone. The question will be whether this follows the trend in recent years or whether the action continues.
At present the market is now providing a >A$315 entry point for ASX contracts for the coming season.
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