Tighter global wheat supplies support markets
The monthly U.S. Department of Agriculture report on domestic and global supply and demand estimates held plenty of surprises for the market. The World Agricultural Supply and Demand Estimates Report showed global stocks of wheat coming down significantly from the previous report, as weather issues in top producing countries have trimmed yield expectations. Russia, Canada and others all had stocks trimmed, leading to higher expected exports for the U.S. However, this same expectation was in place last year when production was much worse than it will be in 2019, so the market will have to wait and see if the U.S. will become the supplier of choice.
Spring wheat prices had been trending lower recently, with good weather in the Northern Plains. The weekly crop progress report from the U.S. Department of Agriculture showed an improvement from the previous report with 78% of the crop rated good or excellent. Winter wheat harvest is also catching up with 47% done (compared to 61% for the five-year average pace). However, the WASDE report's move to reduce global production in key exporting countries led to a rally late in the week. All wheat markets were firmer with a 10.5 million metric ton reduction in global stocks.
The durum market remains quiet. The USDA pegged the domestic crop at just 58 million bushels for the 2019-20 crop year. This is not a surprise given the smaller planted acreage, but a big drop from last year's 77 million bushels. Ending stocks for 2019-20 are expected to increase 5 million bushels from the previous crop year with modest declines to exports and usage. The North Dakota crop is in very good shape, with 74% of the crop rated good or excellent and just 2% in the poor or very poor rating.
The canola market is off of the lows hit late last week, but prices remain very weak. Demand just is not there from China, which keeps limiting any potential rally. Weather in Canada has been mostly favorable after a dry start to the growing season, so production potential is good. The market's greater issue is the uncertainty of the U.S. soybean crop and their relationship with China. These leave a lot of questions regarding production (both yield and planted area are up in the air until later in the summer) and trade (trade war is ongoing and feed demand is not certain due to African swine fever in Asia). Palm oil is also heading into their seasonal period of stocks increasing on rising production, which should add some pressure.
The U.S. barley crop is in very good shape. The USDA showed that 73% of the crop is rated good or excellent, up from last week's 72% rating. The WASDE report showed planted area increasing from 2.6 million acres to 2.9 million acres, but yield was reduced 1.5 bushels per acre from the June report. This led to a production bump of 14 million bushels and an increase in ending stocks.
Mustard seed markets have been steady. Prices are not moving much, but there is potential for some issues due to delayed development in parts of Canada. The crop is in decent shape, with Saskatchewan Agriculture reporting 85% of the crop in good or fair condition (most is fair, though). But much of Saskatchewan is behind normal development, with all oilseeds reportedly showing 57% are behind.
Pulse prices have been mostly steady, with some modest weakness of late. Export business with India remains light due to policies that are protecting their own growers above playing in the world market. Some U.S. exporters are cutting prices to increase sales to India as increased import duties have taken away interest.