Trade wars leave farming as a casualty
Commodity prices have plummeted with the U.S.'s ongoing trade disputes with China, the European Union, Mexico and Canada. Monday's declines were brought on by President Donald Trump's announcement of another round of tariffs on Chinese goods totaling $200 billion.
This would potentially lead to more countermeasures that would further limit demand for U.S. goods abroad. It is almost getting redundant to talk about the influence of this trade war on commodity prices, but it is THE story for the market. With supplies generally comfortable for major commodities, even the potential of reduced demand is bearish.
And regardless of one's political leanings, the impact on farmers is clear: Lower prices hurt. Lower returns again in 2018 are not what many were hoping for, especially after three consecutive years of low prices.
Wheat markets were absolutely hammered, this week. Part of the decline could be from the improving crop conditions for the spring wheat crop, though much of the decline can be attributed to the announcement of further tariffs. The uncertainty in future demand for U.S. commodities with traditional trade partners has shaken the markets and taken a lot of the previous weather premium out.
Though trade is the story, do not let the conditions and weather pass you by. The U.S. Department of Agriculture showed another improvement in spring wheat ratings, to 78 percent good or excellent, compared to 70 percent a week ago. Winter wheat harvest is also progressing well and ahead of schedule, at 27 percent completion.
The durum market stepped modestly lower this week. The North Dakota crop is an impressive 75 percent rated good or excellent. There is little reason to expect much price strength in the weeks ahead (without a major weather shift).
Canola prices found themselves pushed and pulled by the same market force. The expectation of reduced demand for U.S. produced soybeans to China was initially quite bearish for the entire complex. This drop in soybean oil prices spilled over to canola (as one would expect). However, China will still need plenty of feedstock and will likely seek to fill the gap left by the U.S. with other goods. Look to canola to step into that role. As a result, even with the drop in soybean oil, canola found a way to inch higher later in the week.
Peas and lentils
Pulse crops in Saskatchewan are generally in good shape. Most of the crops are at the normal development stage and have benefitted from recent rains. Seventy one percent of the growing area is in surplus to adequate soil moisture, with a few spots that could use some showers in the weeks ahead. Pulse markets have been holding steady, with generally light trading activity. The next potential support will come from an update on planted area for Canadian crops. The market believes that not as much area was planted to lentils as were intended. The June 29 acreage report could provide a spark if area is officially reduced.
The mustard seed market has been fairly quiet. Buyers are looking at new crop supplies, and pricing has dropped as a result.
The U.S. barley crop is basically all planted at this point. The USDA reported 96 percent completion. The crop ratings continue to impress, with 84 percent of the crop rated good or excellent compared to 83 percent a week ago and 64 percent a year ago.