More wet weather but little market movement
It is tough to parse out just what all the rain means in a macro sense.
Clearly, flooding and storms have caused billions of dollars in damage across much of the Midwest. And a return of storms likely will see more flooding and issues.
The impact to individuals and communities is very real and is not to be overlooked. But from a market perspective, it does not appear to be having the same impact.
Take the corn market. Prices had fallen on the expectation of increased planted area in 2019. The flooding and rain will likely take some of the area that was intended for corn and either bring it back to soybeans, another crop, or simply left unplanted. Despite all of that, the July futures contract pushed to a new low this week. Yes, the U.S. Department of Agriculture showed larger stocks, but this was already known given the reports at the end of March. Could it be that large supplies are simply too burdensome to give any significant spark?
Wheat is much the same. Spring wheat planting is shaping up to be quite difficult in some areas given all the wet weather. Total area is expected to be down from a year ago and the lowest on record in the U.S. With all of that, the spring wheat market is just off the lows. Planting has started and is already a bit behind the normal pace.
With large supplies of all major commodities, the market is hesitant to rally on some weather news this early in the planting season. Forecasts are calling for dry weather by the end of the month, which could aid farmers' planting push. And if the crops are planted on time, the soil moisture reserves built up by these rains could benefit crops greatly.
Wheat markets have been holding near the lows. The USDA's most recent updates to supply and demand estimates showed increased stocks for both the U.S. and the globe. World stocks grew by about 2 million metric tons. In the U.S., lower demand led to an increase in ending stock levels of 32 million bushels. Winter wheat crop conditions also improved from a week ago, going from 56 percent good or excellent to 60 percent. That is a huge improvement from 30 percent good or excellent last year at the same time.
Durum wheat prices have not changed. The market will be watching spring planting efforts (not yet started in a significant way). Look for some support if there is any weather problem, as acreage is expected to be down from a year ago.
The canola market is holding steady, unable to find any support without a return of Chinese demand. Prices have been moving mostly sideways for six weeks after major declines from the fall. Attention will soon shift to planting efforts in Canada, but without trade from China, it will all be moot.
The mustard seed market has not seen much excitement in the last week. However, an interesting study by researchers at Kansas State University showed that using mustard seed as a cover crop greatly reduces charcoal rot issues for soybeans and can improve yields. Improved soil health and elimination of the need for chemical treatments are advantages of using mustard seed as a cover crop, and could point to greater usage of mustard seed in areas like Kansas not known for mustard production.
The USDA did not make any changes to the domestic barley balance sheet in this month's report. However, planting progress was reported, showing a slow start. Just 2% has been completed compared to 9% for the five-year average pace. Idaho is well behind normal at just 7% completion versus 32% average.