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House passes farm bill; legislation now goes to president's desk

opinion

Erin Brown/Grand Vale Creative

U.S. government report brings out the bears

Some critical data was released by the U.S. Department of Agriculture this week. There is a lot to digest in each World Agricultural Supply and Demand Estimates (WASDE) Report from the USDA, but August is especially important as it gives a first look from the government on expectations for spring crop yields. The market's key focus is always the corn and soybean yield estimates, though other crop categories are obviously important.

On Aug. 10, the market was absolutely floored by the USDA's outlook for the soybean crop in the U.S. The yield estimate was increased to an incredible 51.6 bushels per acre. This was above the July estimate of 48.5 bushels per acre and approaching the record from 2016. But what really blew the market away was the build in stocks. Trade barriers with China have reduced export possibilities, and with this increase in output, ending stocks swelled to 785 million bushels. This is 18 percent for stocks to use ratio, and is incredibly bearish. Soybean prices were down 43 cents per bushel. Soybean meal fell by over ten dollars per ton and soybean oil prices fell over 40 points following the report's release.

Wheat

Wheat markets cooled this week from the rally that has gripped markets since early July. Prices were pressured by the USDA report coming in roughly as expected for domestic and global wheat, as well as higher corn production lending pressure to the market. U.S. wheat stocks fell by 50 million bushels due to higher export demand. As expected, the global balance sheet tightened up due to a big drop in production from the European Union. Despite this, wheat prices were pressured big on Aug. 10, falling roughly 15-20 cents across all three classes. Much of the poor production news from the world had already been priced in, and a rise in corn yield to 178.6 bushels per acre allowed for pressure on wheat prices from the recent elevated level. In the U.S., winter wheat harvest is basically done. Spring wheat harvest is under way, with the USDA reporting 13 percent completion compared to 14 percent for the five-year average pace.

Durum

Durum prices continue to move sideways, sitting at the lows. There is not very much to get the durum market going at this time. The North Dakota crop continues to show impressive ratings with 81 percent rated good to excellent.

Canola

Canola has seen some support. Some concerns for the Canadian crop as harvest is just getting started has brought prices higher. The bigger story on Aug. 10 was the aforementioned drop in soybean oil due to incredible soybean yield forecasts from the USDA.

Peas and lentils

Pulse markets are seeing some pressure with harvest getting started. Though efforts are just getting underway, early fieldwork suggest a rapid pace for harvest in both the U.S. and Canada. Ukraine is expecting a smaller pea harvest, with the consultant group UkrAgroConsult showing harvest at 850 thousand metric tons compared to a previous estimate of 1.1 million metric tons. Poor weather that has impacted the wheat crops in the European Union are impacting pulses as well.

Mustard

Mustard seed prices are starting the new crop year on a firmer note. Farmers are beginning harvest efforts with reports coming in for average to below average yields. Scattered precipitation in production areas have left some fields below expectations, while others have been experiencing adequate moisture for plant growth.

Barley

The U.S. barley balance sheet saw a small increase in ending stocks. Yields were raised to 76.3 bushels per acre from the July estimate of 75.6. In the U.S., barley harvest is just behind the normal pace at 16 percent completion. For the remaining crop, conditions fell modestly to 79 percent good to excellent compared to 80 percent previously.