Will NAFTA move on without Canada?
Officials from the U.S. and Canada continue to work on a trade deal that would include Canada in the renegotiated North American Free Trade Agreement. The 24-year-old agreement that has included Mexico has come under fire from the U.S. President for being unfair, and threats of pulling out of the agreement have impacted markets for months. Just a couple of weeks ago, the U.S. struck a deal with Mexico, independent of Canada.
Industry participants and lawmakers are urging the administration to get Canada in the new NAFTA, and officials from both the U.S. and Canada have been working toward that goal. However, it seems that a (and possibly, the) sticking point is dairy. The U.S. has deemed Canada's dairy trade practices as unfair and protectionary while Canada has used the current dairy trade relationship to support their farmers. It does not appear that the two sides will reach an agreement this week, but officials continue to work toward the goal of striking an agreement by the end of the month.
There is some optimism that a deal can be reached in the weeks ahead, however. But if they do not, and NAFTA moves on without Canada involved, look for significant shifts in trade patterns due to increased barriers and potentially lower demand.
Wheat markets are falling with improved global outlook for supplies. All of the bullish news had been supporting markets for the last couple of months, and the last bit of hope was for Russia to restrict exports and possibly shift some demand back to the U.S. and Canada. After rumors and announcements, Russia's Agriculture Ministry stated early in the week that no export curbing would take place. The wheat markets were pressured coming out of the Labor Day holiday weekend as a result.
Also adding to pressure is the recent rains in Western Australia improving overall supply outlook. Eastern Australia continues to suffer from drought conditions, but a better production outlook for Western Australia limits overall declines in supply.
Combine this with the facts that export demand for U.S. wheat has been weak, harvest of spring wheat is almost done, and corn conditions are good, and you get prices falling to their lowest levels since early July.
Durum prices have been steady. There is little to drive markets as harvest is near completion.
The canola market has been steady, this week. The weather in Saskatchewan is definitely supportive to prices, as some of the crop likely was damaged by the frost and colder than normal temperatures. Any major support is being curtailed by the lack of movement in the broader fats markets. Soybean oil prices have been steady to lower, and palm oil markets have also seen pressure on an expected increase in stocks (due to weaker export demand). Canola markets will keep watching the broader fats' trends as it cannot get too far away and become uncompetitive.
Peas and lentils
Pulse harvest efforts in Saskatchewan were slowed this week on cool and damp conditions. Some areas were hit by a killing frost, as well. Much of the pea and lentil crops had already been harvested or swathed, so just a portion of those commodities were at risk from the frost (though other crops like chickpeas and soybeans were not as far along and thus at greater risk).
Mustard seed production expectations remain high. Statistics Canada is forecasting a 10 percent yield increase from a year ago, which will result in 175,300 metric tons for production. This would result in a 44 percent jump in overall output due to increased planted area. With much of harvest yet to complete, these forecasts often fall short of the final output. However, given current conditions and early reports, do not expect final production to be too far off of this lofty projection.
The U.S. barley crop harvest is winding down. The U.S. Department of Agriculture reported 84 percent completion compared to 83 percent for the five-year average pace. Only Montana and Idaho have more than 10 percent of their crop remaining in the field for harvest.