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Economy worries and moves dominate

Usually during this time of the season, attention is on harvest and late-season weather. The markets are trying to wrap their collective "mind" around supply levels for crops.

Usually during this time of the season, attention is on harvest and late-season weather. The markets are trying to wrap their collective "mind" around supply levels for crops.

But this year brought a variety of broader, macroeconomic drivers that have to be considered. The first was the attack on Saudi Arabia's oil refineries. About 5% of the world's crude oil production was taken offline as a result of the attack, sparking a major rally in the crude oil market.

As the dust has begun to settle, much of that rally has come off. Saudi Arabia is expecting the refinery repair to take a matter of weeks, so the global supply of oil should not be disrupted in any major way. However, this attack raised fears of the future for oil and the global economy. Initially, rebels in Yemen claimed credit for the attack, but Saudi Arabia is identifying Iran as the source of the weapons.

The U.S. also has a close diplomatic relationship with Saudi Arabia, and could be drawn into any retaliation if and when that occurs. Middle East conflict with involvement by the U.S. would hurt the global economy and fears of that slowdown have crept into the market.

Also this week, the U.S. Federal Reserve took interest rates lower. This is just the second time that has happened this year and is typically a move that is used to combat recession. The Federal Reserve seems to be making this move to stimulate spending and borrowing (especially by businesses that have been hesitant because of the ongoing trade war with China) ahead of the potential global economic slowdown. The hope is that doing so ahead of time would limit the impact on the U.S.

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Wheat

Wheat markets are off of recent lows, though a major rally is not what is happening. Prices are simply rising with some buyers stepping in to capture lower markets.

There is some concern that crops from producers in the Southern Hemisphere may not be very good. Australia is dealing with ongoing drought in the eastern part of the country. Additionally, Argentina's weather has not been ideal. But the U.S. and Canada remain well supplied. The EU, Russia, and other exporters are also sitting on large supplies. As a result, global market support has been limited.

The U.S. spring wheat crop is still a bit behind normal harvest progress due to rains over the last few weeks. These are expected to continue into the end of the month, so expect a drawn-out end to harvest work.

Durum

The durum market is unchanged with little news. The same conditions that are slowing the work on spring wheat is impacting the durum crop. Expect prices to stay low into the fall.

Canola

The canola market jumped higher with the rally in crude oil (the result of the attack on Saudi oil refineries). Prices did not come back down after that bump, however.

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It is known that trade with China has been nonexistent due to diplomatic tensions. Until that issue is resolved there will likely not be any major support.

Barley

The barley crop in the U.S. is behind its usual harvest pace (the five-year average is 93%). The U.S. Department of Agriculture reported 76% completion. Rains continue to fall in many areas, making harvest work difficult. Thankfully, the warmer-than-usual temperature outlook should keep fears of early frost damage at bay.

Pulses

Saskatchewan's initial lentil and dry pea forecast is calling for fair quality of the crop. Harvest is roughly 75% done for lentils and 79% done for field peas in Saskatchewan.

Most reports show decent crops, with more than 50% estimated at grade No. 2. Warm weather over the last week has helped push harvest progress along.

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