Wittal: Financial markets drag on grains

March 3 — Grain markets started off Tuesday with the idea of a turnaround and hopes of regaining some recent losses, only to be pulled down by sliding financial markets and finishing unchanged or down for the day.

Crude oil was up $1.50 to close at US$41.65 per barrel. The U.S. dollar was up slightly today and the Canadian dollar was down marginally, closing at US77.66 cents.

Corn was unchanged, beans were down two to up 14 cents per bushel, and wheat was down one to five cents per bushel. Canola was down $3 to up $6 per tonne, and barley finished down $3 to $5 per tonne for the day.

Grains tried to recover after the hard selloff Monday but with no new export news to help sustain the rally, grains were overshadowed by the ongoing financial market saga and pulled back to or below yesterday’s meagre closing levels.

Here are some interesting reports from the Reuters news service:

  1. A report stated that U.S. President Barack Obama is planning on phasing out direct payments to farmers with sales of more than US$500,000 a year, to save $9.8 billion over 10 years, or roughly one-fifth of the US$5.2 billion spent annually on the payments.
  2. Australia’s grain supply pipeline is reported as needing significant investment to overcome problems exporters face in getting grain to customers.
  3. Stocks of grain in Spain left over by this summer’s harvest could double from last year, according to farmers and traders who have yet to sell sizeable amounts of barley because
    of a flood of cheap wheat imports.

A report predicts that current trends in consumption and imports would lead to grain stocks of 4.7 million tonnes, up from 2.3 million at the end of the 2007-08 crop year.

All this means is that consuming cheap wheat is much more profitable than any other cereal, referring to imports of Black Sea wheat. Ukraine has exported 2.18 million tonnes of wheat to Spain since the market year began last July. Grain merchants’ association ACCOE estimates that prices of soft wheat, barley and maize have fallen by an average of 34 per cent in Spain the past six months.

Reuters has also reported that heavy rain has damaged around 533,000 hectares of crops in central and eastern China, quoting the official Xinhua agency Tuesday, citing China’s Ministry of Agriculture.

The worst-hit areas were in central Hubei province and eastern Jiangsu and Jiangxi provinces, with some areas seeing three to four times the usual amount of rain. The downpours were forecast to continue until March 6.

China’s farmers have already been struggling this year with a serious drought that Beijing called the worst for 50 years and which affected nearly half of the country’s winter wheat fields, Reuters said.

There are a lot of issues, problems and concerns in the world that impact the markets every day and these are just a few.

That’s all for today. — Brian

Brian Wittal has spent over 27 years in the grain industry, including as an elevator manager and producer services representative for Alberta Wheat Pool, a regional sales manager for AgPro Grain and farm business representative for the Canadian Wheat Board, where he helped design some of the new pricing programs. He also operates his own company providing marketing and risk management advice for Prairie grain producers. Brian’s daily commentaries focus on how domestic and world market conditions affect you directly as a grain producers.

Brian welcomes feedback and information on market conditions in your area, such as current offering prices, basis levels, trucking premiums and special crops contracts. Contact Brian today.

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