The News & What it Means: Buckle Up for Weather Markets

By John DePutter & Dave Milne – May 1, 2018

 

The news:

“Most of western Canada can expect to see regular rainfall in the month of May, but still not likely enough to erase lingering moisture deficits.”

– Syngenta website article, Mar. 30, 2018

 

What it means:

Plenty of market volatility, and sleepless nights for farmers.

 

Up until this past growing season, the weather problem that many Prairie farmers often grappled with was too much rain. But now that the faucet has turned off, those farmers in the driest areas, particularly south-central Saskatchewan and southern Manitoba, are no doubt anxious about when it will turn back on again.

 

Of course, a drier bias to the weather will be welcomed for the next number of weeks as farmers take to the fields to get the 2018 crop planted. And after some late-season snowstorms in March and even into April, there is likely to be enough topsoil moisture to support germination and early crop development. It is after that, the angst about the potential continuation of dry weather is likely to begin.

 

Drought persists

As shown on the map below, areas of severe to extreme drought persist in Saskatchewan, with plenty of moderate drought and abnormal dryness bleeding across the border into Manitoba as well. Across the border, a large portion of the western U.S. northern Plains – the main U.S. spring wheat production region – remains unfavourably dry as well.

 

 

At this point, the market’s attention has been mostly focused on the slow start to planting on the northern Plains, with unusually cold April temperatures and relatively wetter conditions in the eastern growing areas combining to limit progress. As of Sunday, just 10% of the 2018 American spring wheat crop was in the ground as of Sunday. That’s 20 points behind a year earlier and is now 26 points behind the five-year average. In North Dakota specifically – the largest spring wheat production state – the crop was 3% seeded versus 17% last year and 22% on average.

 

There are still no formal estimates of Canadian Prairie seeding progress, but it’s worthwhile to note there are parts of Western Canada where farmers are looking at setbacks from overly wet ground this spring, particularly in portions of western Alberta which saw heavy winter snowfall.

 

Weather the key market factor

As most farmers know, nothing much else but the weather matters to the markets as we enter the growing season. To that end, the July Minneapolis spring wheat future has already seen its ups and downs, swinging from just over US$5.80 to begin the month to nearly $6.45 in a matter of a few days. (The market was trading back under $6.20 as of early afternoon May 1).

 

 

Buckle up, we’re just getting started. If the weather continues to be a story – and history suggests there will be scares along the way – we’re poised to see a lot wilder market action and many more sleep deprived producers.

 

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