Markets will continue to watch what is happening in the Black Sea corridor as there has still been no word on whether Russia will agree to extend the grain passage deal that expires this Thursday, May 18.
“It seems to be up in the air still,” says Jack Scoville of Price Futures Group. “The Ukrainians believe it won’t be extended so it probably won’t.”
The Black Sea situation is definitely supportive of wheat, but improving weather in some wheat regions is having the opposite effect, he says.
Longer weather impacts may also be supportive of wheat, Keith Good, University of Illinois Farm Policy News editor, writes in his May 15 analysis.
He cites Bloomberg writers Michael Hirtzer and Tarso Veloso Ribeiro’s report on May 11 that “America’s wheat fields have become so plagued by drought that farmers are now poised to abandon crops at the highest rate in more than a century.”
“Producers are expected to harvest about 67% of their planted acres, the U.S. Department of Agriculture said Friday. If realized, that would be the lowest harvest ratio since 1917, the agency said in a monthly report,” Good reported.
Depending on how much wheat is abandoned, this could factor into wheat prices for a while, Scoville says.
Hirtzer and Ribeiro explained, “The USDA forecasts that the high rate of abandonment will drag U.S. wheat supplies to lower levels than analysts were expecting. That could keep domestic prices elevated, even with rival producers such as Canada and Argentina likely to boost output.”
However, that depends on exports and if buyers want to buy U.S. wheat, Scoville says.
“Meanwhile, corn production in the U.S. is expected to rise to a record, bringing up global grain supplies and giving relief to livestock producers hit by rising feed costs,” Good quoted from the Bloomberg report.
U.S. corn and soybean supplies were expected to rise sharply in the coming year due to forecasts for a record harvest for both crops, the government said May 11, raising the potential for further price declines for both commodities, Good says.
However, Scoville says corn and soybean harvest may not reach current projections. He says USDA projections are high.
“We might be looking at the highest estimate of the year,” he says.