New lows for wheat ahead of spring
Wheat markets are under pressure.
The Chicago and Kansas City contracts are hitting new lows this week. The July hard red winter contract is down 16 percent since the start of February. Minneapolis futures contracts have been hovering at old lows, finally breaking through late in the week.
With all this pressure in the wheat markets, it is tough to be optimistic heading into the spring. Most of the time when prices start March lower, the markets tend to continue lower into April and May.
With expectations for improved output globally after last year's significant problems in Australia, parts of the European Union, and the former Soviet Union or Black Sea region, it is tough to get traders excited about these markets.
Wheat prices, as mentioned earlier, have trended lower still this week. The market cannot find its legs, as fund managers keep getting shorter.
On top of this, wet weather late in the winter has built up great soil moisture reserves in the Central Plains. Though some areas will be struggling with too much water, most will be seeing a boost to eventual production as large moisture reserves tend to bode well for the dry part of the growing season.
Recovery in global production is expected, so we should not expect a big boost in export demand in the 2019/20 crop year to soak up the large stocks. Obviously, a global or domestic weather change could alter that outlook and prices would be supported accordingly. But if the weather remains normal or favorable in many parts of the world, look for wheat price weakness to continue.
There has not been a lot of action in the durum market. Minneapolis prices have held steady with spring approaching and wheat markets under pressure.
Demand for French durum has picked up in recent weeks after a slow first half of the crop year. Current sales are 17 percent behind a year ago, but much like the broader wheat market, is presently priced competitively. This takes away potential demand for U.S. and Canadian durum that many expected to come through in the spring.
The canola market again hit new lows. Demand has not been good as tensions between Canada and China persist. Seed supplies are huge, as well. On top of this, the rallies in soybean and palm oils have cooled, leaving no underlying support from the broader fats markets.
According to recent data from Statistics Canada, shipments of mustard seed have been down since late in 2018. Total shipments in January totaled 9.7 thousand metric tons compared to 20.8 in December. However, this brings the total for the current crop year to 48.7 thousand metric tons, which is up 5 percent from a year ago.
The U.S. Department of Agriculture updated its supply and demand estimates for the barley crop for the current crop year. Though changes were minimal, a reduction of 2 million bushels of imports resulted in a dip in ending stocks of an equal amount. This decline to 91 million bushels of ending stocks will have little impact on prices.