"With US and Canadian markets tight again this season and potential Black Sea supply concerns, a repeat of history of extending premiums has the potential to maintain a bullish outlook for wheat,” commented CRM Agri analysts.
There are plenty of similarities and lessons to be learnt from the last time there was conflict and tension in Ukraine, according to their grain market outlook.
“In the spring of the 2013/14 season, Russia annexed Crimea, causing concern for global wheat markets. Regardless of the actual disruption caused, the potential for disruption lent support to wheat markets as buyers went to cover their needs. Within six weeks, Chicago wheat futures had moved from a c$120/Bsh premium over corn to c$220/Bsh.”
There remains underlying support for corn markets, from ongoing expectation for Chinese demand, concerns for South American corn yields, the tensions over Ukraine and potential trade and logistical challenges, they noted.
Continued strong demand for US corn is expected, potentially tightening US ending stock projections, said the CRM Agri team.
Impact of La Niña
La Niña and dryness concerns are persisting for southern Brazil and Argentina.
“NDVI scores for Brazil have recovered, however, key first corn producing states continue to be a concern for yields. Drought severity has also slightly eased lately, but a lack of rainfall has moved north.
“In Argentina, and again, drought severity has recently slightly eased with rainfall across central regions. However, drought severity persists in the north, and although drought conditions may have eased, the damage has potentially already been done.”
Soybeans rallied to new contract highs, reported CRM Agri on Friday [January 21].
“Again, yield concerns for South America and tightening global stock levels have continued to provide an underlying support, further aided by a combination of a bullish crude oil market and unconfirmed reports of large US export sales.”