Smart Marketing | Wheat's loss is soybean's gain

Wheat's loss is soybean's gain

Grains
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Spring planting in North America is under pressure.

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SPRING planting in North America is under pressure.

In the US it is from the flooding as a result of the deep snowpack melt and recent heavy rains.

In Canada it is geopolitical resulting in a shutdown of Canada's canola exports to China.

The expectations for this year had been for US spring wheat acres to increase as some acres moved over from soybeans.

The expected delays to the start of the planting season have reversed that idea. Some areas will remain too wet to plant to wheat during the optimal planting window. The expectation is that lost wheat acres will be planted later to soybeans.

Over the border in Canada there could also be a late start to planting because of the large snowpack that has to melt. While that will supply valuable soil moisture, the associated flooding will cause delays.

Again that may mean either planting later than ideal or switching to other crops that can be planted later.

The real issue for Canada is the collapse of canola exports to China. Officially exports have been blocked for contamination reasons, but it follows the arrest of Huawei finance chief Meng Wanzhou, and the trade disruption is seen as being political.

Whatever the real reason, orders for Canadian canola have dried up.

China bought 4.5 million tonnes of canola in 2017, so slicing one million tonnes from that is a big drop for this year.

Total Canadian canola exports have been reduced to a four-year low of 9.8 million tonnes for this year but have been projected to lift back to 10.5 million tonnes in 2019/20. However, this assumes a partial recovery in the trade to China.

The fallout is that acreage in Canada is likely to move from canola to other crops as canola prices slump to 10-year lows. This could see a shift to spring wheat, durum, barley and pulses. There could also be increased acreages of corn and soybeans.

Once the expected late planting is overcome, Canada could be set up for a big wheat crop. The next six weeks will be critical in determining just what acreages get planted in both the US and Canada, and how those crops establish.

Meanwhile US farmers will to continue to come under financial pressure with projections that one in six grain farmers will operate at a loss this year. 

Corn stocks in the US have been declining over the past two years but are still above 2016/17 levels.

US wheat stocks have also declined over the past two seasons, but only slightly and remain very high.

In contrast US soybean stocks have blown out, and any increased acreage this year will continue to put upward pressure on stocks until trade with China resumes.

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