Market drivers can be tough to identify

For those keeping up with the agriculture markets week-by-week, the winter can at times be simple and at other times odd and confusing. It is easy to track the market during the winter if the fall's harvests are known and supply levels are unders...

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Agweek file photo

For those keeping up with the agriculture markets week-by-week, the winter can at times be simple and at other times odd and confusing.

It is easy to track the market during the winter if the fall's harvests are known and supply levels are understood: There was a big crop, so prices are generally weak (or vice versa). What gets tricky at times is the lack of supply-side and production news can create a vacuum that allows for some small- or outside-market factor to drive prices in a more significant way than it would during the summer.

Egypt's economy has been struggling and in order to ensure bread supplies for its government assistance program, wheat imports are going to be ramping up in April. India may not extend an exemption for fumigation of lentils. These things (and many similar) have a big impact on the markets' demand, yet become difficult to follow and understand the significance of, at times.


Wheat markets have continued to trend lower. The winter wheat crop had been dry for several months, raising concerns (and therefore prices) that dryness would impact the dormant crop.


But a return of rains at the critical month of emergence from winter dormancy could very likely negate the dry winter, and this is coming to fruition.

Weather forecasts hold plenty of rain through the first week of April, and this should provide the winter crop with plenty of moisture to start spring growth.

Planted acreage for spring wheat likely will be down, however. That reduction, coupled with the drop in winter wheat area, should limit downside potential (even with large stocks from 2016-17).


The durum market has maintained its quiet tone through the entire winter. Even with some support in wheat, prices held near the lows. The large supply situation for durum kept any outside support from rallying the market. Now that spring is near, look for weather and acreage expectations for durum to allow markets to move (rather than simply continue sideways with old crop stocks pressuring).


The broader oils markets have found some modest support after hitting new lows last week. Some buying interest for soybean oil (bargain buyers stepping into the market) pushed the market off some technical support points.

Additionally, it appears that the Trump administration is going to push forward with the increases to the biodiesel mandate that were announced in the last months under Obama. This could mean a boost in demand for fats, especially if the proposed change for the tax break goes from the blender to the producer. Note, however, that markets are still very near the lows achieved last week (just not continuing to fall lower).


For canola, it has been difficult to maintain any upward momentum, even with strong demand and tightening stocks. The repeated news of bigger production estimates out of Brazil and Argentina, along with expected production increases for palm oil in Indonesia and Malaysia, are keeping a bearish tone for canola. Until new crop planting and weather can drive canola news, look for it to take direction from the soybean oil futures market.

Peas & Lentils

The ongoing story for pulses is the unknown demand for exports from top-buyer India. The Indian government is moving towards self-sufficiency in pulses and has not suggested that an exemption for Canada's non-fumigated with ethyl bromide would be extended.

Additionally, a temporary waiving of import tax on lentils may not be reinstated.

These things point towards lower demand in the coming months and years. Canadian exporters are only conducting sales in the short term, and are not looking for commitments further out that may bite them financially.


With spring plantings still to come, the market is keying on Agriculture Canada's recent forecast for the 2017-18 crop year. Note that these estimates are not based on surveys of farmers but purely on models and statistics completed by the analysis branch in Winnipeg. Total production is expected to reach 155,000 metric tons on 160,000 hectares. This is a big drop in area and output from a year ago, when 234,000 metric tons were produced on 212,000 hectares.

Export demand is thought to remain strong, so ending stocks should decline modestly to 70,000 metric tons from 85,000 metric tons, this year (but up still from just 5,000 metric tons in 2015-16).

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