Markets finally respond to wet weather
It definitely took a while.
The market had been trending lower for weeks. Pressure had come from the ongoing and intensifying trade war between the U.S. and China, as well as diplomatic tension between Canada and China. On top of that, huge supplies of grain and oilseeds domestically and abroad had kept pressure on. Speculative funds were holding incredibly large short positions for corn, wheat, and soybeans.
Even with wet conditions across the majority of the U.S. growing areas all spring, the market had generally shrugged off planting delay news. As late as Monday (after China's move to increase tariffs on $60 billion of U.S. goods in retaliation of a previous tariff hike announced by the Trump administration), agriculture markets were pushing to new lows.
And then the markets turned. The U.S. Department of Agriculture put out its weekly Crop Progress and Conditions Report on Monday afternoon, and the market was surprised at how far behind planting of corn, soybeans, spring wheat, and other crops were. The market had been trading under the assumption that the last week of dry weather would have gotten farmers somewhat caught up, but when the report showed ongoing delays the market began to rally. This brought out some buyers and funds began to reduce their net short positions. As a result, prices have rallied most of the week for major agricultural products.
For most of the U.S. Corn Belt and Northern Plains, weather has been cooperative and dry this week. This should allow for good progress which will be reported Monday afternoon.
If that occurs, look for the market rally to cool as fears of major acreage loss and quality issues may subside. But if the USDA shows that farmers are still well behind, look for higher prices, as rains are set to return to growing areas in the latter part of May.
Wheat markets are higher, approaching levels not seen since March. From a technical perspective, old highs have not been breached, so there should be some resistance to upward price movement if bullish sentiment continues.
Spring planting delays are supportive, with the weekly USDA report showing 45% of the crop done compared to 22% a week ago and 67% for the five-year average pace. The winter wheat crop remains in very good condition with all the wet weather: 64% of the crop is rated good or excellent compared to last year's 36% rating.
The durum market has not been moved by this week's bump in wheat prices. In North Dakota, the durum planting push is delayed, though not as behind as other crops.
The USDA reported farmers planting 25% completed compared to 24% a year ago, but lagging the five-year average pace of 35%.
The canola market has continued to work higher. There has not been a major change in export expectations with China directly, but the intensifying of trade conflict between the U.S. and China does point toward more demand shift away from the U.S. with some oilseed exports going to Canada. This has yet to materialize, though.
Weather remains an issue in many areas, too. Hanging over the canola market is the large supply situation.
The U.S. barley crop is delayed, but farmers made good progress in the last week. USDA says 59% of the crop has been planted compared to the five-year pace of 72%.
Peas and lentils
The growing season for pulses will provide market direction in the months ahead, but for now, lagging export data is driving prices. Good Indian demand for lentils is supportive, while weak pea imports by China is bearish.
Prices for mustard seed have been unchanged for the last few weeks. Planting in Canada has been progressing at a slower pace than normal, with farmers in Saskatchewan reportedly 3% behind the average pace. Planting is progressing much faster than a year ago, however.