Agriculture & Agri-Food Canada reports
An update from the Canadian government on its outlook for old and new crop gave the markets plenty to digest, this week. Old crop durum stocks were higher on good output, though much of the crop was of lower quality. For 2017-18, planted area declined 16 percent from a year ago, and production should fall even further as yields return to trend following last year's boom. Barley production and area are down as large carry-in stocks prompted producers to choose an alternative crop. Old crop canola supplies are uncomfortably tight with strong export demand taking supplies to just 600,000 metric tons. Farmers then planted a record 9.2 million hectares, which will boost production significantly if yields are at trend or above.
The wheat market remains focused on the weather. Conditions have been dry for most of the country, and hot as well. This has lent support, or at least maintained previous levels, to wheat futures. U.S. spring wheat crop conditions fell even further as heat and dryness remain an issue. Some areas got rain in the last week, but more is needed. The U.S. Department of Agriculture's weekly report showed 34 percent of the crop rated good/excellent and 41 percent rated poor/very poor. This is down from 35 percent good/excellent and 39 percent poor/very poor, a week ago. The winter wheat crop in the U.S. is nearing the end of harvesting; 75 percent of the crop is done, compared to 73 percent for the five-year average.
The durum market continues to be firm on weather issues. North Dakota reported just 24 percent of the crop rated good/excellent and 38 percent as poor/very poor. Continual crop deterioration is going to cut into production, significantly. But weather issues for durum production are not just in the U.S. and Canada. Italy has been suffering from a significant drought that is hammering durum production (among other crops).
The canola market has been able to ward off significant support that many have expected. Weather has been favorably wet lately, but forecasts show heat and dryness returning. Despite that forecast and support in the U.S. soybean oil market, canola has largely been holding steady. Statistics Canada updated the new crop outlook for field crops, and surprisingly expanded production by 250 thousand metric tons, despite recent weather woes. The apparent explanation is that producers in the northern growing regions have not been hit with the same heat and dryness, and recent rains are enough to prevent yield loss (even if conditions turn drier in the coming week).
Peas & Lentils
Pulses are generally fairly resistant to drought issues, but the high temperatures for much of the early summer likely has had a significant impact on yield. If heat continues, more yield loss is expected. As a result, prices have been firmer (as expected).
The Canadian Grains Commission reported slow movement of mustard seed in the last week. Just 200 metric tons were cleared through reporting terminals, bringing total exports for the crop year to date to 22,200 metric tons.
Barley conditions improved modestly with the recent precipitation in the U.S. Now, 53 percent of the crop is rated good/excellent, compared to 51 percent a week ago. This is obviously still below last year's 73 percent good/excellent rating, but any improvement is welcomed. The crop is almost entirely headed at 89 percent, compared to 91 percent for the five-year average.