Despite other news, July weather is the key driver
Here are just a few of the things that are going on with commodity markets. U.S. planted acreage for spring crops is still not known due to an extremely wet spring. China's trade relationships with the U.S. and Canada are being hampered by geopolitical tensions. Aid payments to U.S. farmers have been uncertain until details were released this week by the Department of Agriculture. Yet the key market driver is the weather (which is always the case in July).
Spring crops are in a key window for development while winter wheat harvest is wrapping up. Crop production hangs in the balance, and the market is watching. Forecasts show generally favorable weather coming up, and so many markets are seeing pressure.
Wheat prices came under some pressure this week. Better weather for many growing areas in the U.S., along with pressure from corn, provided the market with plenty of reasons to decline. Spring wheat is developing on schedule, with the U.S. crop 92% headed compared to 94% for the five-year average pace. Spring wheat crop ratings improved from a week ago, to 63% good and 13% excellent from last week's 66% good and 10% excellent. The winter wheat harvest is in its final weeks, and improved weather has allowed for farmers to catch up after a slow start. 69% of the crop has been harvested compared to 79% for the five-year average pace.
The durum market took a step lower, this week. Prices had been flat for the last couple of months, only a little bit off of previous lows. Support (as small as it was) had come from lower planted area for the 2019-20 crop. But prices have not been able to hold up this week, as this year's crop looks pretty good. North Dakota's crop is 73% rated good/excellent.
The canola market has kept some of its strength from a week ago, but prices are still not far from recent lows. The market is dealing with ongoing trade issues with China, which is limiting demand. Poor weather in the Prairie Provinces to start the growing season has diminished yield potential, but production will not be a disaster. The bigger issue facing the canola market is the direction of soybean oil (given the U.S. and China have trade issues of their own). Trade talks are expected to resume soon, with both sides "hopeful." But no details or concrete plans have been announced other than some Chinese companies are going to buy some U.S. agricultural goods "soon." Time will tell if the trade war is nearing its end or is just getting started.
U.S. barley development is just slightly behind normal, with the U.S. Department of Agriculture reporting 90% headed compared to 95% for the five-year average. Conditions held steady from a week ago, with 76% of the crop rated good or excellent.
Mustard seed markets have been quiet with light trading activity this week. In Canada, the poor start to the growing season will likely have a significant yield impact, even with rains providing some relief during the month of July. Conditions have dropped off in many areas from earlier in the growing season.
Pulse export demand was strong in June after months of slow activity. The Canadian Grain Commission reported 231,700 metric tons of field peas loaded for export during June, and lentils totaled 79,100 metric tons. That puts field peas about 25% above a year ago while lentils are up almost three-fold.