New North American trade deal a win for US dairy

The U.S. and Canada's negotiators reached an agreement just before the self-imposed Oct. 1 deadline on the North American Free Trade Agreement, or NAFTA. The U.S. and Mexico had come to an agreement just weeks prior, and many wondered if the agre...

Dairy cattle.jpg

The U.S. and Canada's negotiators reached an agreement just before the self-imposed Oct. 1 deadline on the North American Free Trade Agreement, or NAFTA. The U.S. and Mexico had come to an agreement just weeks prior, and many wondered if the agreement would move on without Canada involved, as repeated roadblocks during negotiations seemed to prevent a three-way solution. But the two sides did come together, and while the official trade agreement is not signed (President Trump plans to sign within 60 days) this did allow markets to settle in an understanding that trade between the U.S., Mexico, and Canada would continue much as it has in the past.
The new deal is more than a thousand pages long, and all the details are not yet known. First impressions are that much of the agreement is similar to the original NAFTA with some key changes. For agricultural markets, the biggest change is for dairy. The U.S. dairy industry has long struggled with their lack of access to the Canadian dairy market and complained of Canada's protective policies. The new agreement allows for more U.S. dairy products to enter Canada without duties. Another focus was the automobile manufacturing industry, which will look to make more cars in North America, improving wages in Mexico in the process. But the biggest thing that the market took away from the resolution is that President Donald Trump got a deal done. Depending on one's politics, this can be viewed as a triumph or a solution to a self-created problem. But regardless of the optics, the trade dispute that has been in place with the U.S.'s neighbors had an end. The bigger trade dispute with China could be the focus of U.S. officials' efforts next, and though no end is in sight with a whole different set of challenges, this could be a blueprint for resolution down the road.
Wheat markets have been relatively quiet, holding in their established range. Global drivers are more of the focus than domestic issues, with spring wheat harvest completed in the U.S. In Saskatchewan, spring wheat harvest is at 58 percent completion. Australia got some rain that helped a bit with the extreme drought (though the rains were far from enough to fix the problem). Rumors that Russia will utilize quality concerns as a way to cut off exports in the coming months had circulated and supported global benchmarks, though the government refuted this claim late in the week. The U.S. winter wheat crop is being planted in wet conditions, which could be beneficial for the crop's development (as long as some break in the rain comes before winter dormancy). Similarly, the Black Sea region got some good rain for planting winter crops, which is alleviating some fears of next year's crop production falling short as it did in 2018.
Durum prices are holding steady. In the U.S., harvest of the durum crop is done, but in Canada, cold and wet weather have been hindering the durum crop's harvest. Saskatchewan reported 84 percent of the crop harvested compared to 82 percent a week ago. Of the remaining crop, look for some quality decline, but the expectation at this point is for little overall output declines.
The canola crop has strengthened on a variety of factors. Prices have first found support from a rising crude oil market. Additionally, demand from China is rumored to be stronger, keeping export expectations high. Harvest delays in Canada from cold and wet weather are lending support, as well. Much of Alberta is covered in snow and some progress has been made in Saskatchewan, but efforts are still behind a year ago. The weekly report from Saskatchewan showed that 52 percent of the canola crop had been harvested compared to 84 percent a year ago. There could be some of the crop left in the field to harvest in the spring, which raises questions about total production that cannot be answered until early 2019.
Peas and lentils
Pulse harvest continues to lag in Canada. Cold and wet conditions are keeping farmers from getting fieldwork done. Saskatchewan Agriculture showed 73 percent of the crop done compared to the five-year average pace of 78 percent. But with more cold and wet weather in the forecast, look for more delays in next week's report.
Mustard seed
Harvest weather remains the concern for the mustard seed market. Snow, cold, wet, ugly - conditions are not very good for getting the crops harvested. Canada's crop is 76 percent done, basically unchanged from a week ago and well behind normal. The five-year average pace would have 84 percent of the crop harvested by late September and, a year ago, 94 percent of the crop had been harvested by this time.

Related Topics: MARKETSWHEAT
What To Read Next