July USDA reports briefly pressure
The wheat market has pulled up commodity prices with hot and dry conditions in the spring growing areas of the U.S. and Canada. Even with winter wheat harvest efforts in the U.S. going well, the narrative has been completely focused on the struggling spring wheat crop. Add to this rally, a turn to hot and dry conditions for the Corn Belt as the corn crop is reaching its critical pollination stage, and overall support was inevitable. One final support was the moving of funds to a more long position after being short for quite a while. Wheat positions for funds moved out of a net short for the first time in two years.
As the USDA released its World Agricultural Supply and Demand Estimates (WASDE) Report this week, the growth in corn and wheat stocks took the wind out of the rally's sails. No changes were made to new crop yield estimates for spring-planted crops, but the carry-ins are so large that a crop problem can be better absorbed. This does not mean that a price rally is not going to come later in the summer if weather problems persist — it simply means that the top of that rally may have been lowered a bit with these larger stocks heading into the main part of the summer growing season.
Wheat has been driven by weather — there is no doubt about that. The spring wheat growing areas of Canada and the U.S. have been too dry and hot. Weather forecasts are showing a continuation of heat, but some rains are expected in the six to ten day and eight to 14 day forecasts. These rains are critical to salvage a crop out of the mess that the current crop is in. The USDA reported spring wheat conditions at a dismal 35 percent good to excellent from 37 percent last week and 70 percent a year ago. All that being said, the winter wheat harvest is going well and is nearing its final weeks. The weekly USDA progress report showed 67 percent of the crop as done. There has been plenty of talks that the crop was better than initially expected. The WASDE report showed an increase in old crop supplies with a drop in feed demand. This carries over into the 2017-18 crop year, and even with a small yield drop (only for winter wheat — spring wheat will be revised in August's report) stocks are able to increase from the June report by 14 million bushels.
The durum market has continued to rise with weather problems. There are plenty of old crop supplies available, but new crop looks to be short. The USDA is expecting North Dakota production to total just 29.2 million bushels this year — a decline of 50 percent from a year ago. The average yield is expected to hit 27.0 bushels per acre from 40.5 bushels per acre last year.
The canola market has been consolidating with some rainfall in the western prairies. Saskatchewan remains a little too dry, however. The big picture with canola remains the tight situation for old crop heading into the new crop where acreage was increased significantly. Demand has been strong, too. The U.S. remains a big user of canola, keeping old crop stocks tight. But pressure is expected heading into the later part of the summer.
Peas & Lentils
The hot and dry weather conditions are providing plenty of stress to crops in the southern part of Saskatchewan. Crops like soybeans and chickpeas are being stressed, but (so far, at least) pulses have not seen a condition hit. Lentils rated good to excellent increased to 62 percent from 61 percent a week ago. Dry field peas did drop a bit to 66 percent good to excellent from 69 percent last week, however. But the ongoing concern is the persistent heat and dryness in the Northern Plains in the U.S. and nearby growing regions in Canada. Conditions have been too dry and hot, and the coming forecasts' call for rain will have to be realized to provide some relief for the struggling lentil crop.
There has been very little excitement for the mustard seed export market in recent weeks. The Canadian Grains Commission (CGC) reported just 400 metric tons cleared through reporting terminals. Total shipments to date are now at 22 thousand metric tons compared to 21 thousand metric tons in the last crop year.
Barley crop conditions (reported weekly by the USDA) dropped modestly to 51 percent good to excellent from 52 percent a week ago. The WASDE Report showed a significant increase in old crop stocks for barley, so carrying that increase into the 2017-18 crop year (even with a production decrease expected) stocks were mostly unchanged at 73 million bushels.