Signs of life in the wheat market
Market pressure has been the story for wheat (and many other commodities) for the last several weeks. Tariffs and trade concerns with the U.S. have pushed prices lower. On top of that, weather in the U.S. and most of Canada has been good, increasing expectations for good crops (generally). Speculative funds were getting shorter and the markets could not hold up against the bearish pull lower.
But some signs of life were felt in the wheat markets this week. Weather, though not anything close to last summer's heat and dryness in the Northern Plains, is having some pockets where crops are being stressed. The corn market may have lost a little on the top side of yield projections due to drought conditions in parts of Iowa, and less corn downside translates to less wheat downside later in the year. Additionally, the reports out of the European Union, Ukraine, and Russia continue to be supportive for the global wheat supply outlook. Weather problems in many areas like France, Northern Europe and Ukraine paint a bleak picture. And as wheat is a globally traded crop, U.S. markets are following support in those markets (albeit more slowly due to the decent supply situation domestically).
Prices are off the lows in Chicago and Kansas City, though sitting right on support in Minneapolis. It is difficult for spring wheat prices to drop too much, as conditions from the U.S. Department of Agriculture remain at an impressive 80 percent good to excellent. Winter wheat harvest is also progressing slightly ahead of the normal pace, at 74 percent completion. The weather in the Northern Plains and Prairies in the weeks ahead will dictate short-term direction. Longer term, look for the global supply situation to be the main driver.
Minneapolis durum markets are unchanged from a week ago and remain near the lows. Prices have little upside risk due to good crop conditions. North Dakota conditions are an incredible 81 percent good to excellent.
Canola is finding some support on lower rapeseed production expectations in the EU (due to late rains in France) as well as Canada. The USDA expects 2018 output from Canada to fall to 20.2 million metric tons (which is down 9 percent from a year ago). Major support has been limited by ongoing weakness in palm and soybean oils, however.
Peas and lentils
While the Canadian crops continue to grow in mostly good conditions, the big picture story for pulses is India. Over the last several months, increased import taxes and restrictions of overseas purchases have limited sales from Canada to the world's top consumer of pulses. According to Bimal Kothari, vice chairman of the Indian Pulses and Grains Association, pulse imports could fall to 1.2 million metric tons in 2018-19. This would be an 80 percent reduction and the lowest import total in almost two decades. Canadian sellers are scrambling to find places to export, with the U.S. and China taking more peas and Mexico taking lentils.
The U.S. barley crop is in excellent shape. The USDA reported 85 percent of the crop good to excellent (unchanged from a week ago).