A sharp drop in corn and wheat futures over the past number of days could represent the first cracks in the Western Canadian feedgrain market, although tight supplies and uncertainty over new crop grain production remain supportive.
"With the move on the futures market this week. . . it might be the first cracks of any significance we've seen in this market," said Jim Beusekom of Market Place Commodities in Lethbridge.
The nearby July corn future fell 40 cents/bu on Thursday, backing away from multi-year highs in the wake of the USDA’s first supply-demand estimates for the upcoming 2021-22 crop year. Released at the noon hour on Wednesday, the report projected new-crop corn ending stocks at 1.507 billion bu, up from 1.257 billion for the current year and above trade expectations. Wheat was also hit hard today, with the benchmark Chicago wheat market down 27 cents.
"The underlying futures market is down, so we would expect the cash market to follow," Beusekom said, adding the drop in futures is already showing up in the cash market with feed barley and wheat bids coming off of their highs.
However, feedlots are generally well covered for the time being, with most of their attention shifting to the new crop which will be harvested in 70 to 80 days. Meanwhile, dryness concerns across much of the Prairies will keep all eyes on moisture conditions over the next two months.
"We're in a weather market," Beusekom said, adding that a meaningful rain, especially in Saskatchewan and Manitoba, would change the situation. While most old crop barley is already priced, "it will take a general rain across the Prairies before farmers move the last of their inventories," he added.
Source: DePutter Publishing Ltd.
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