North American heatwave, droughts: ‘Crops will have suffered’
Peter Collier, senior market advisor, CRM Agri, weighed in on the hot weather conditions in North America for FeedNavigator:
“Canada is the largest global producer of oilseed rape, and hugely important for global supply, even if, from a European and UK perspective, Ukraine and Australia are the larger suppliers of imported seed. Following what has been a year of very strong demand, strong canola prices have been incentivizing an increased planting area
“With the well documented dryness for northern US spring wheat also impacting Canada, NDVI scores as a measure of plant light absorbance have been deteriorating.
“Given the ongoing dry conditions, and now heatwave across Canada, yields will likely have suffered, and new crop Canadian canola prices have pushed higher once more.”
The gains in Canadian canola offer support for Paris rapeseed, he said.
“Looking ahead, there are now cooler conditions forecast and patchy rainfall, but crops will have suffered.”
Planting and stocks estimates
On top of the weather developments, this week saw the US Department of Agriculture (USDA) release two critical publications: the June acreage report, with updated US planting estimates, and the stocks report.
Corn area revisions in the June planting report were marginally revised upward, disappointing markets expecting a greater area increase, said the analyst.
Owing to the strong price incentives, markets were expecting a greater increase in area, but with an increase nonetheless, corn prices moving to ‘limit up’ is a very large reaction, he commented.
In the other important USDA report, corn stocks in all positions on June 1 are down 18% from 12 months earlier. Of the total stocks, on-farm stored corn is down 39% from that period, but off-farm stocks are up 11%, noted Collier.
Updated US planted area estimates for soybeans also disappointed markets, he said. The planted area for 2021 is estimated at 87.6 million acres, up 5% from last year.
Soybeans stored in all positions on June 1, 2021 are down 44% from June the year prior. On-farm stocks ae down 65% from a year ago, while off-farm stocks have decreased 27%.
“It is unclear how both corn and soy areas were both expected to have increased in the US in the latest June planting estimates; however, with stocks tight for both commodities in the US and crop conditions far from ideal, the planting report provided the catalyst for bullish speculators to buy back into agricultural commodities,” added Collier.