Depressed markets got you down?

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It is no secret that agriculture markets have largely been down in recent years. Even the last few months have seen prices fall unexpectedly low given reduced acreage for many crops from the 2016 season. While this is not a therapy column by any stretch, try to take some encouragement from longer-term drivers.

Weather has been incredible for the last three years for most parts of the U.S. and Canada (save the summer's drought in the Plains). The probability of excellent weather yet again is slim. Acres continue to fall for wheat, so that could continue to chip away at stocks domestically, especially if there is adverse weather in the spring. Biofuels demand continues to rise. So while there is no guarantee of higher markets, little downside is possible as prices are already so low. And potential for strength is there in 2018.

Wheat

Wheat markets in the Chicago and Kansas City are pushing toward new lows while Minneapolis is at its lowest point since the run-up in the early summer. The market has been pressured consistently by huge global supplies. All other major exporters have huge stocks in addition to large stocks in the U.S. and Canada. This makes it difficult for any weather or future supply concerns to take hold and rally prices.

In the U.S., for example, planted acres are expected to drop (again) for the 2018-19 crop as returns for farmers remain dismal. And for the winter crop already planted, conditions are not good and continue to fall as winter dormancy approaches. The U.S. Department of Agriculture reported just 50 percent of the crop rated good to excellent from 52 percent a week ago and 58 percent a year ago.

All of these things would normally point to some market strength, but overwhelming supplies are keeping markets in a sideways to downward trend. The one point of strength has been basis levels for higher quality wheat. Though overall supplies are large, there is less quality wheat available and demand for that wheat has spiked some basis markets.

Durum

Durum prices remain flat with general wheat weakness overwhelming the market.

Canola

Canola markets have been following palm and soybean oil futures. Those markets have generally been weaker (with some late-week rebound). Canola demand remains strong both from the U.S. and other export outlets. However, large supplies of global oil and recent weakness in palm oil make it difficult for canola to rise for fear of pricing out of the market. Statistics Canada will release updated estimates for crops on Dec. 6. Historically, this December report has held large changes from fall expectations and previous reports. Look for that report to drive prices into year-end.

Peas and lentils

Pulse exports have been slowing, with India's government policy to restrict imports and spur domestic production the primary cause. The Canadian Grains Commission reported 176,600 metric tons of field peas loaded for export through reporting terminals in October. This is down 49 percent from last year's 344,000 metric ton total. It is also down 69 percent from September 2017.

Lentil shipments are also off, with just 13,900 metric tons reported in October from 130,200 metric tons in October 2016. Total for the marketing year to date is 84,000 metric tons versus 307,000 a year ago.

Mustard

Mustard seed prices in India were firmer as demand has been strong in recent weeks.

Barley

Chinese government farm supports for corn are leading to higher demand expectations for barley. This year, China reduced supports on corn for farmers which has led to lower planted area for the crop. In turn, import demand is expected to climb in 2018. Some are expecting imports to increase from 3.5 million metric tons in the 2017-18 crop year to 5 million metric tons in 2018-19 to 7.5 million metric tons in 2019-20. Lower domestic supplies of corn not only increase potential import demand but also lead to higher demand for other feeds.

Barley shipments from Australia in November are expected to hit 537,000 metric tons, with 44 percent of that volume heading to China. Through October, calendar year imports of barley have totaled 7.64 million metric tons (an 83 percent increase from the previous year). Canadian exports of barley have been booming as a result of higher Asian demand.

Through the middle of November, 542,000 metric tons have been shipped out of Canada (a 130 percent increase from the previous year). China, Japan and Saudi Arabia have been the biggest buyers.