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Wheat rising on weather woes

After the last few growing seasons, many market participants have forgotten what weather stress feels like. For those involved with spring wheat, the last few weeks have been a strong reminder. Conditions have been hot and dry, and the wheat crop is struggling.

The U.S. Department of Agriculture has reported a major decline in crop ratings over the last few weeks, with just 45 percent of the crop rated good/excellent compared to 62 percent just two weeks ago, and 79 percent a year ago. Weather forecasts do not appear to show relief coming any time soon. The six-to-10 day forecast does show some cooler weather, but dryness will persist.

Wheat

Wheat prices are firmer, with Minneapolis futures taking the lead. Prices have rallied over 20 percent from the low in May. The winter wheat crop harvest is in full swing, with the USDA reporting 17 percent completion compared to 15 percent for the five year average.

Durum

The durum market remains supported. From a historical perspective, prices are still very low as supplies are large from the previous year. However, given the basically flat pricing for nearly 12 months, any jump higher is worth noting.

The poor growing conditions in the Northern Plains of the U.S. and into Canada are creating a supportive environment for durum. The North Dakota crop is taking a beating, with USDA ratings showing zero percent rated excellent, just 20 percent good, and 72 percent fair. These crops need rain as soon as possible.

Canola

The soybean oil market has been working higher since the start of June, though not to new highs. Palm oil has also turned in the last week, heading higher after declining during the first week of the month. So what about canola? In a flip from the recent narrative (where canola was holding support as palm and soybean oils were falling), canola prices were largely pressured, this week. But why?

Better weather has come for the canola crop, with plenty of moisture for the growing crop. Old crop stocks remain tight, and the market is not falling excessively; traders are still wary as the summer has plenty of time to turn hot and dry. However, improved crop outlook is keeping pressure on, even with some support in the broader oils markets.

Peas & Lentils

Pea prices have stayed firm over the last few weeks. A major concern for exporters (and growers, as well) is the expiration of the fumigation exemption on June 30. Recall that the Indian government has placed restrictions on imports of peas fumigated with ethyl bromide, but extended the allowed period for suppliers to adjust practices. This could limit demand in the coming months if not adjusted. On the other hand, a drought in Spain has impacted overall crop production there, and it is likely that demand for non-meat proteins will be strong.

Mustard

Mustard seed export movement has been slow of late. According to the Canadian Grains Commission, just 100 metric tons of bulk mustard seed were cleared through reporting terminals in the last week. This brings exports to date to 19,400 metric tons compared to 19,700 metric tons at the same time a year ago. This is significant, as the current year's pace had been exceeding the previous year's pace until this recent slowing.

Barley

Most of the U.S. barley crop has emerged. The USDA reported 91 percent of the crop emerged compared to 93 percent for the five-year average. Conditions improved from a week ago, with 72 percent of the crop rated good/excellent. This is up from 69 percent last week, but a drop from last year's 78 percent.

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