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Shake up in domestic sugar market

Arctic conditions across the U.S. brought record-cold temperatures and raised some important crop issues.

Winter wheat that has been planted in the Central Plains was vulnerable to the cold as adequate snow protection was not in place.

There were some initial concerns for the corn and soybean crops that have not yet been harvested, but those seem largely to have passed. But one big development with the extremely cold weather is the domestic sugar situation.

U.S. refined sugar markets have been steady for the last couple of years. Ever since the U.S. and Mexico ironed out details on what can be brought into the country as raw and refined cane sugar, there has been little question about the availability of the sweetener. Prices hovered just above government support levels, and supplies could be easily managed by bringing more or less sugar in from Mexico as needed.

But this year, the sugar beet harvest has been slowed by wet weather during October. As of a week ago, just 70% of the crop had been harvested when usual progress was over 90% complete. Major delays in Michigan, Minnesota and North Dakota had kept beets unharvested. Then this week's bitterly cold temperatures have resulted in two producers (Western Sugar Cooperative and United Sugars Corp.) declared force majeure on commitments to their customers.

The damage to the beets is too severe to salvage, and the result was a rise in the sugar futures market. Last week's U.S. Department of Agriculture report cut production of beet sugar, but further cuts will come in the December report. The crop harvest is now effectively done (at 96% complete), and the market will have to bring in more sugar from Mexico to meet demand. Until then, look for support to continue.

Wheat

Wheat markets did see some initial support on the cold weather, but the longer term trends have stayed in place. The spring wheat futures market continues to step lower while the hard and soft winter wheat futures contracts remain in a sideways trading pattern.

The cold weather has had an impact on U.S. winter wheat crop conditions, with the weekly Crop Progress report showing ratings falling to 54% good or excellent from 57% a week ago. These ratings in the fall often have little correlation to final yields, but the market did take note of the cold. The lack of snow protection in many areas could result in some freeze damage that will be discovered and assessed at a later time.

Durum

Durum wheat prices have held steady. The Minneapolis durum price took a step lower last week after rallying off of multi-year lows, but further declines have not followed. It seems that the market is content at this mark heading into the winter.

Canola

The canola market has been moving sideways, with little new drivers to bring support.

There had been some initial hope of resumed trade with China, but most of that optimism has run its course.

There is some potential support as the soybean and palm oil markets rise, as demand could shift to the cheaper canola alternative. And there is still about 10% of the crop left to be harvested in Canada that could face some issues given the cold weather. However, lack of trade with China is going to limit upward opportunity.

Pulses

With North American harvest basically wrapped up, much of the pulse market's attention has been on India. Import demand for field peas out of Canada has been weaker while demand for lentils has been solid. Domestic demand has been good, too. This is keeping a generally firm tone to the markets.

Mustard seed

Mustard seed markets in North America have been steady over the last week. Harvest in Canada is basically done, as the little remaining portion of the crop may not be harvested until the spring.

Barley

The USDA's supply and demand balance sheet took domestic barley production higher than the October report. Yield was boosted to 77.7 bushels per acre from last month's 77.4. Despite this increase, ending stocks fell on lower imports: stocks dropped to 93 million bushels.