Broken record: Weather is the driver
The summer makes for such a dynamic market environment, where weather forecasts and actuals can whip-saw markets from day to day. Many crops are in critical growing stages, and traders are poised to move on the slightest change in a weather map. Volatility makes for good selling opportunities for producers, but also adds to the headache of managing a crop at times. So, once again, the biggest thing to watch as the market rolls into August and the beginning of harvest efforts is the weather.
The wheat market has declined significantly from the previous week's highs. A break from the heat and dryness has allowed for prices to take back some of the gains. Major downside (particularly in the Minneapolis wheat market) has been limited by known production declines. Winter wheat harvest in the U.S. is in its final stages. The U.S. Department of Agriculture showed 84 percent completion compared to 80 percent for the five-year average pace. Spring wheat conditions fell, but only modestly: 33 percent of the crop is good to excellent and 40 percent is poor to very poor. Some weather relief in the Northern Plains has helped stop the bleeding, but significant damage has been done to this year's spring crop.
The North Dakota durum crop is a disaster. Even with some recent weather improvements, conditions are dismal. Just 14 percent of the crop is rated good and zero percent is excellent. Seventy three percent of the crop is rated poor to very poor. Adding to support for durum, Italy is being hit with a terrible drought, and as a top European producer of durum wheat (for exports within the European Union and pasta production), this adds to market strength. So, as expected, the durum market continues to strengthen.
The canola story continues to be dynamic from week to week. Prices fell to a new low as improved weather conditions in more northern growing areas coupled with large planted acreage put pressure on the market. Later in the week, support returned, however.
Weather is again proving a hindrance, and renewed concern about tight carry-in stocks is keeping downside limited. Soybean conditions in the U.S. dropped from a week ago, reaching 57 percent good to excellent compared to 61 percent last week and 71 percent a year ago.
Peas & Lentils
The U.S. field pea crop is struggling, as well. The USDA reported just 15 percent of the crop in good to excellent condition while 43 percent is rated poor to very poor. The crops in the Pacific Northwest are in good shape, but Montana and North Dakota are the problem spots. Harvest is getting started in the latter, but official yield reports are not yet known. Pulse prices continue to be strong.
The Canadian mustard seed crop has been estimated (not taking into account farmer surveys) at 150,000 metric tons by Agriculture Canada. This would be a significant drop from last year's 234,000 metric tons, but planted area has contracted by 58,000 hectares. Exports should continue to climb, however, to total 117,000 metric tons.
Barley conditions in the U.S. further deteriorated, dropping to 51 percent good to excellent. This is a drop from last week's 53 percent and last year's 73 percent. Not surprisingly, the area with the most problems is North Dakota, which has suffered greatly from the recent heat and dryness.