NAFTA talks coming to the forefront
The North American Free Trade Agreement enables the U.S. and Canada to exchange all types of goods with limited restrictions. While much of the focus of negotiations and issues revolve around manufactured goods, the agricultural trade portion could be impacted in a big way. Transport of canola, grains and animals all would be impacted if the NAFTA talks deteriorate. Look for news regarding this agreement to drive the market wild, as overall impact to commodity markets is unknown.
Wheat markets have been relatively quiet. Weather has improved largely, though still wetter and colder than usual in some areas. Winter wheat conditions dropped again this week, falling to 51 percent good/excellent from 53 percent a week ago and 62 percent last year. This is not unexpected due to the snowstorms in Kansas at the start of May, therefore the market did not respond in any big way to this information. Spring wheat planting surged ahead, with farmers taking advantage of better weather in the U.S. 78 percent of the crop has been planted compared to 73 percent for the five-year average.
Durum prices have remained near the previous lows, with little market activity. Planting in North Dakota is lagging compared to a year ago, at 52 percent completion compared to 63 percent a year ago, but ahead of the five-year average pace of 45 percent. 15 percent of the crop has emerged.
The canola market has been supported relative to other fats due to strong demand and tight stocks following last fall's harvest disruptions. Planting has been a bit of an issue so far this spring, with rains and cool temperatures keeping farmers out of the field. Additionally, the broader oils markets have been on the rise.
Potential for increased biodiesel demand is looming over the market, and could drive prices markedly higher. Additionally, palm oil's increasing output into the summer is being used up with stronger usage and exports. In North Dakota, the planting efforts are lagging compared to a year ago, but in line with the five-year average at 44 percent completion.
Peas & Lentils
There is plenty of reason for support in pulses, of late. The first bullish indicator is a possible loss in production in India. Farmers there are looking to move to other crops, namely cotton, due to an expected return to normal monsoon rain levels as well as the opportunity for greater returns on alternative crops. "There will be a sharp surge in cotton cultivation," says Ashwani Jhamb, director of the Indian Cotton Association.
The next bullish factor is the Canadian Grains Commission confirming strong export business. Season-to-date exports of peas are roughly 3.1 million metric tons compared to 2.1 million metric tons last year. Obviously, production of pulses was up in 2016, but higher export demand is helping eat away at those large stock levels.
Lastly, planting progress for lentils in the U.S. and Canada is lagging due to cool and wet weather conditions. While this may not impact overall production, it could still delay eventual harvest and availability of new crop supplies in the fall.
New demand for Canadian mustard seed is not really inspiring, leading to a quiet market. Through the end of March, 79,000 metric tons of mustard seed had been exported, which is up just 1,000 metric ton from a year ago.
Yet this small increase is in the wake of a production increase of 48 percent from the previous year. Obviously, the hope is that demand will pick up to help deal with the burdensome stock levels, but that has yet to be realized.
Barley planting took a huge step forward in the U.S. in the last week. The USDA's weekly Crop Progress and Conditions report showed 78 percent completion compared to 79 percent for the five-year average (and up from 53 percent a week ago). The same report showed 42 percent of the crop had emerged versus the five-year average of 50 percent emergence.