The month of June saw the ag markets start to take on a volatile nature with Minneapolis wheat futures leading the way. Futures started off the month posting almost 52 week highs as it cracked the 4.00/bu mark for the first time since last June. After which the glut of unsold farmer corn in the US and an appetite from managed funds to rebuild their short positions quickly pushed futures down 35 cents to support levels around 3.65/bu. But it wouldn’t stay here long as drought conditions in the US central plains rapidly depleted the spring wheat conditions and kick-started a bull rally leading into the June 30th planting report and old crop stocks update. Usually this report is regarded as one of the more important releases in the year as the USDA publishes their official acreage estimate for the current crop year. US planted acres on corn was initially estimated to drop from 94 million acres in 2016 to just under 90 million acres this year. The USDA released a revised estimate of 90.886 million acres on the report, almost a million acre increase over the expectation. Combine this with a June 1st quarterly stocks estimate of 5.225 billion bushels compared to 4.711 billion bushels a year ago should have provided the market bears with ample power to hold push the market back to the monthly support levels. However, the impressive bull rally in wheat created enough moment across the pits to keep pulling it up to test the 4.00/bu market coming out of the July long weekend.
Another factor to take note of over the last while is the rally the Canadian dollar has been on. Since hitting a low of .7250 in early May (the lowest point since February 2016) the dollar has risen to just over .7700, primarily driven by the Bank of Canada statements that it will be increasing interest rates this week. This swing in the dollar has had more impact than the volatile futures when looking at the flat price since most commercial grain bids are derived from a US basis value. Holding futures and US basis the same, the flat price will have dropped by over 25 cents/bu during the rally from May to today.
Looking across Ontario there are crop conditions that range from excellent to very poor. The abnormally wet spring caused plenty of grief during planting, with the majority of corn not getting planted until the second half of May and into early June. Though not a big concern if normal growing conditions are experienced and a cooperative fall allows the crop to fully mature, but it is easy to take a cautious tone with the potential hurdles we have ahead this season. Parts of Central and Eastern Ontario were switched from corn to beans, or abandoned altogether. Multiple areas experienced well above normal rainfall in May and June, which cause uneven germination and development. The good thing is we finally got some heat, the rains backed off to normal, and when you drive around much of SW Ontario you can see a decent corn crop coming. Here’s hoping to a normal weather pattern for the next 60 days!