Spring is approaching, but agriculture markets are in murky territory when it comes to the primary price driver. Should traders focus on old crop supplies? That seems like old news, but for wheat the shadow of huge global surplus limits any potential rally. Exports and exchange rates are definitely a contributor to price movements, but this represents only a portion of the demand side of the balance sheet. We are not quite to the spring weather markets, and planting decisions for spring crops are not announced for another two months. Developments in South America also tend to drive some markets.
These types of markets tend to see reduced volatility compared to the growing season. View this as an opportunity to prepare and position yourself ahead of the madness of planting season.
Wheat
The Chicago and Kansas City wheat futures markets have been supported by the dryness in the Central Plains, but for now, the Minneapolis futures market has not seen much spillover support. Much of this is due to the fact that Minneapolis has been holding a premium over the Chicago and Kansas City markets since last summer. Also, the dry conditions in the U.S. are primarily impacting just the winter wheat growing areas. For now, major upside is limited by the fact that supplies are pretty comfortable globally, though spring weather and planting decisions are going to become bigger drivers in the coming months.
Durum
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Durum prices remain steady in Minneapolis. There has been little new information to make any significant change in market sentiment, of late. Expect mostly steady prices until the spring when planting progress and weather news can shape outlook for the new crop.
Canola
The canola market has found some support from recent strength in soybean oil. There has not been a lot of independent news to drive canola. Much like soybean oil, global supplies are relatively comfortable amid a good demand season. Prices have found some support in the last few weeks from poor weather in Argentina that is stressing their soybean crop. From a technical perspective, canola markets are knocking at the upward resistance point of $500 that has been in place for some time, but has so far been unable to push through.
Peas and lentils
The biggest news for North American pulse producers is that there was not news from India to drive prices. The recent trend has shown increased planting area from week-to-week for the Indian rabi crop, which has been bearish for pulse prices. However, due to a national holiday last week, India's government did not publish updated plantings data. This lack of news has kept pulse markets steady.
Mustard
The most recent forecast from Agriculture Canada held the first look at the 2018-19 crop year. The Agriculture Canada report projected total production at 145,000 metric tons on 150,000 hectares. This (if achieved) would be an increase from the 2017-18 crop which totaled 122,000 metric tons on 156,000 hectares. Recall the heat and dryness last summer that stressed crops in the prairies and reduced output. Agriculture Canada also pegged exports at 125,000 metric tons compared to the expected 120,000 for this season and 124,000 for the 2016-17 crop year.
Barley
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Demand from China for barley remains robust. With growing demand from the livestock industry, China is buying up almost all of Australia's available barley. This situation is exacerbated by the push in Beijing to divert corn supplies toward ethanol production. With the recent uptick in barley purchases from Australia, roughly 80 to 90 percent of the country's total export volume is headed to China.
