Markets are in a post-holiday rush
Commodity markets have an interesting pattern to close the calendar year.
Typically, markets have a lot of excitement and volatility prior to Thanksgiving. There is harvest wrapping up, South American market data to digest, and the beginning of the major export season. Then the holiday week typically has little movement as market participants are less engaged and focused on travel, family, and eating too much.
Then, for the few weeks before Christmas, there is a shift that occurs: Some data on production and exports will shape direction and traders look to square positions and get ready for the new year.
A couple key things that are different about this year: Late harvest of some spring crops and the potential "phase one" trade deal between the U.S. and China. Keep an eye on these issues for the balance of December. Because once January hits, attention will be on export demand and potential plantings for 2020.
Wheat markets were mixed over the last week or so. Spring wheat futures bounced higher off of the lowest mark since early September. Chicago and Kansas City markets had been firming into the Thanksgiving holiday, but took a turn lower this week.
The primary driver of the market is global trade. It appears that some areas of Europe had issues in the fall with too much rain. This will limit next year's output in France and the U.K.
Australia continues to lower its forecast for the wheat crop because of ongoing drought.
In the U.S., conditions were good for the winter crop to start, but those ratings fell before winter dormancy. The U.S. Department of Agriculture has stopped reporting on those conditions weekly, and will resume in the spring.
Russia is expecting a big crop next year and this year's crop was a good one.
So with all of that done, attention is set on trade. Most exporters are well supplied (except Australia), keeping pressure on the markets. U.S. sales are tracking with expectations set by USDA, so any major changes are not expected in upcoming supply and demand estimates.
Durum prices have been steady for the last few weeks. The market's attention, like with the broader wheat market, is set on export demand.
Demand to Europe continues to be strong, particularly to Italy. The Italian government had sought to limit imports of durum to protect its local farmers, but poor durum production in the European Union is keeping demand strong for U.S. and Canadian produced durum for pasta production.
Canola prices fell back to its lowest mark since September. The lack of a trade deal between the U.S. and China has limited strength in soybean oil. This is keeping the overall support for fats limited.
Canola's issues are known, with some areas in Canada not yet harvested due to the start of winter weather. This will be harvested once temperatures rise in the spring. But this is already priced into the market.
Without a trade deal or major upward moves continuing in palm oil, there will be little independent action for canola to bring support.
Barley prices have been firm as a good boost to export demand to end November rallied the market.
Weekly sales were at a season-high 115.6 thousand metric tons, bringing the 2019-20 crop year total to 606,000 metric tons. This is still about 4% below last year's pace but does represent a good push heading into winter.
Additionally, feed demand has been strong: A 7% increase in feed prices in Alberta takes the market to its highest point since before new crop supplies came in, in August.
Lastly, the rail strike at the Canadian National Railway boosted prices as supplies were not as available in many areas.
Do not expect a continued rally for the market, however. Supplies are more comfortable than a year ago, and soon the backlog of grain shipments will be sorted.
Trade remains light for Canadian mustard seed, but prices are keeping a firm tone.