Wheat markets find strength in dry weather, China announces tariff on Australian barley
USDA crop progress report for the week ending May 17, 2020 show US spring wheat seeding progress passed the midway point over the last week, reaching 60% of acres planted. This progress is still lagging behind the average.
The 5-year average seeding progress for this week is reported at 80% for comparison. The percent of the US winter wheat crop rated good to excellent was 52%, a 1% decrease from the previous week and lower than the 66% reported at this time last year.
The North American wheat futures markets reversed their previous downward trends this week. The Minneapolis, Kansas, and Chicago wheat markets have all bounced off recent lows from last week and have begun a new upward trend. Dry conditions continue to be cited as a concern for crops in multiple export regions this spring. US crop tours are noting dry conditions in the winter wheat crop tours, while Russia’s IKAR lowered wheat production forecasts by 1 million metric tonnes.
Feed prices in Alberta continue a slow decline. Forces holding up the prices likely include increased feeding demand from a backlog of cows waiting to be processed, and remaining pent up export demand of barley to the west coast due to rail disruptions earlier this year. Issues pressing down on feed opportunities include prospects of a large feed supplies in 2020, mainly from the large US corn crop which has had an excellent spring planting season so far.
Additional support for barley may come in the form of a developing trade dispute between Australia and China. This week, China announced it would apply an 80.5% tariff on Australian barley imports for the next five years. This tariff is expected to halt barley imports from Australia which has been China’s main source of barley. With this announcement, China is making clear the intention to source imports from other exporting countries, one of which is Canada.
While Canadian barley exports have improved into China over the last 3 years as Australia has suffered persistent drought conditions, this tariff will provide short term support to these recent gains. Longer term, Canadian barley exports will see continued competition for the China market from other barley export regions, such as the EU, the Black Sea, and South America.
Resources: AWC’s most recent Market Insider column.