Grain Markets Analysis
On April 1, 2020 global wheat markets broke the upward price trend that had held over the last two weeks. The rise in prices may have been a reaction from buyers who were facing uncertainty as to if global trade would continue given the global pandemic. This is a concern that has also been raised by the World Health Organization, which has called for governments to maintain free trade of food products and the movement of agricultural workers despite the uncertainty brought on by the pandemic. Concerns regarding export bans focus mainly on Russia, which exports the most wheat annually and has limited exports in recent years. To date, Russia has announced a export cap from April through to the end of June of 7 million metric tonnes of wheat, maize, barley and rye. As this amount is in line with expected exports from the region during this time of year, the announcement has not impacted markets.
With no threatening export bans announced to date and countries defining essential services, international buyers are receiving signals from major wheat exporters that business will attempt to continue as normal. Without a risk to wheat supplies, buyers will now adjust their purchases to their best estimates of what domestic demand will be under various levels of quarantine.
After dropping to 68 cents US during the recent market drop, stimulus announcements and support packages presented by the federal governments of both Canada and the US have provided some support to the Canadian dollar. After briefly touching 72 cents US, the dollar has dropped to 70.8 cents. This change has created wild swings in the basis offering for farmer’s wheat. According to www.PDQinfo.ca, the average of southern Alberta CWRS basis reached $1.76 per bushel when the Canadian dollar was at its lowest. This average has since retreated to about $1.40 per bushel. Further movement in basis due to currency exchange is likely in the weeks ahead, and will depend on how investors perceive that Canada and the United States are coping with the pandemic.