Norton: Markets rise on summer weather worries

CRESTWOOD, Ky. - While spring weather markets are nothing new, sometimes rallies at the end of spring can cause us to scratch our heads. Yes, there are some legitimate crop issues caused by weather.
Argentina has lost a significant amount of soybeans from what was previously expected to be a record crop because of excess rains as harvest season approached. The extent of this loss is somewhere in the 5 million to 9 million metric tons, which is not peanuts.
Some rains in the Southern Plains of the U.S. have created some quality concerns for the winter wheat crop with harvest just getting underway.
Beyond this, much of the market support is coming from forecasts months out, while nearer-term weather has been favorable.
The Corn Belt has warm and wet weather in the forecast, which is very favorable for early-season development. Some rains have fallen in the Canadian Prairies, which have alleviated drought concerns. Europe has plenty of moisture headed into the summer and Australia is expecting huge wheat output with strong rainfall the past few weeks.
It’s good to stay aware of the potential for dry and hot weather in the summer, which could reduce output for major crops. El Nino is gone and La Nina is most likely on its way, which could bring some of those conditions. But, the world has large stocks and weather forecasts in early June for late summer are hardly 100 percent accurate. There is a lot of growing season ahead and the market will have more reliable information to trade off than just far-dated weather forecasts.
Wheat
Wheat prices are up this week, as support from other commodities combined with some weather concerns have rallied the market.
Near-term forecasts show some needed dryness coming into the Plains for harvest of the U.S. winter wheat crop (which is expected to be very large), but some protein concerns remain.
Winter wheat harvest was reported two percent complete compared to 10 percent for the five-year average. Spring wheat conditions held steady from last week’s rating at 79 percent good to excellent.
Durum
Durum markets remain depressed, with prices showing little movement in recent weeks. In North Dakota, durum wheat conditions were 78 percent good to excellent, according to the U.S. Department of Agriculture’s weekly report. Ninety-eight percent of the crop is planted compared to 91 percent last year at this time.
Canola
Canola prices have been keeping pace with the soybean oil market in past weeks, but some good weather leading to rapid planting progress and improved growing conditions has allowed for slight weakness at times.
On the flip side, the U.S. has been buying a lot of foreign oil this year. The current pace suggests a record 6.7 billion pounds of palm and canola oil will be imported. Additionally, last week’s crush was reported down 22 percent to 140,000 metric tons. This points toward tight near-term supplies that should keep canola prices supported.
Peas and lentils
Pea prices on the international market remain firm with demand high for small global stocks.
Yellow peas have been trading at a premium to green, but some demand is switching. This has increased the green price in Canada and the U.S. of late. India’s state trading company has issued tenders for 45,000 metric tons of pulses, the bulk of which is 35,000 metric tons.
For lentils, the tight old-crop supplies are shifting attention to the new crop.
Many worries have been alleviated as Canada’s lentil crop planting is basically done, with 98 percent in the ground compared to 88 percent at this time in 2015. This helps ease worries of early frost damage in the fall.
Mustard
According to the Canadian Grains Commission’s report, mustard seed exports continued to lag in April. Exports totaled 9,550 metric tons in April, a 20 percent dip from April 2015.
The export total for the marketing year-to-date is 88,310 metric tons, which is 6 percent below last year’s 94,190 metric tons. This slow export pace highlights the shortage of physical product given lower planted area and production in the 2015 to ’16 crop year.
Barley
Barley condition ratings from USDA showed a slight improvement from the previous week. Seventy-eight percent of the crop was rated good to excellent, compared to 77 percent a week ago and 76 percent last year. North Dakota’s rating of 83 percent good to excellent was unchanged from a week ago.