Canada and U.S. still at odds over NAFTA
The negotiations on the North American Free Trade Agreement continue between Canada and the U.S.
There have been several roadblocks that keep the two sides from coming to an agreement ahead of the end of September deadline. Note that the end of September deadline is one that was put in place by the Trump administration. The thought is to get a deal done before the new Mexican president is put into office at the end of the year.
But Canadian representatives do not feel that time pressure and are looking to make the best deal for Canada. Previously, Canada's dairy policies had been the sticking point, with the U.S. attacking its northern neighbors for dumping product into the U.S. and devaluing its farmers' products. Now, the Canadian representatives are hung up on the U.S. wanting to include an automobile tariff of 25 percent on Canada's cars into the country and will not sign an agreement with that tariff included.
NAFTA represents roughly $1.2 trillion of trade between the three participating countries, and these ongoing negotiations and uncertainty for future trade patterns have market participants on their toes.
Wheat markets rebounded from the lows hit last week, though markets have not shown that they can sustain a rally. From a technical perspective, this recent strength falls in the downward trading channel. The ongoing story for wheat markets is the global supply situation. With harvest of most wheat in the Northern Hemisphere either done or nearly done, crop sizes are basically known. In the U.S., spring wheat harvest has now reached 97 percent completion. The questions remain around just how much Russia will eventually export, and this likely will not be known until early 2019.
Winter wheat planting for the 2019 U.S. crop is underway: 13 percent of the crop has been planted compared to 14 percent for the five-year average. It will be interesting to see just how much is planted to winter wheat, as acreage has declined in recent years. The main replacement crop has been soybeans, but given poor returns for soybeans due to remarkably large supplies, one would not expect many farmers to choose to switch area from wheat.
Durum markets have been steady. Prices are weak and show little sign of strength given the comfortable supply situation. In North Dakota, 94 percent of the durum crop has been harvested. With some rain in the forecast, it may take another couple of weeks to finish the last 6 percent, but look for farmers to get it done by early October.
The canola market made new lows in the November contract, this week. Prices then bounced off that low but remain close to levels not seen since July. Pressure across all fats markets persists. The U.S. went ahead with tariffs on $200 billion of Chinese goods, prompting China to retaliate with $60 billion of its own tariffs. This move pushes the two countries further apart on trade and makes the market believe that lack of Chinese demand for U.S. soybeans will continue. Statistics Canada is expecting production to hit 21 million metric tons, though outside reports are wide ranging in terms of crop size and quality. But large carry-in supplies and a weaker soybean complex all keep pressure on canola heading into the fall.
Peas and lentils
Despite fears that India's protective trade policies would dampen export potential for Canada, lentils are off to a hot start for the 2018-19 season. Terminals reporting to the Canadian Grains Commission have loaded 73,000 metric tons for export. This is the fastest start since 2014.
The U.S. barley crop is nearly done. The U.S. Department of Agriculture showed 96 percent of the crop had been harvested.
Mustard seed markets in North America are unchanged from a week ago. Harvest in Canada is roughly 70 percent done. This harvest activity represents about 128,000 metric tons, which is ahead of last year's availability for market of 100,000 metric tons.