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NORTON: Summer brings usual market volatility

CRESTWOOD, Ky. -- Heading into the summer, many major commodity markets were trending higher. Corn was supported by some weather concerns. The soybean complex was dealing with Argentine rains reducing the crop. Wheat had shaken off much of this n...

Corn
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CRESTWOOD, Ky. - Heading into the summer, many major commodity markets were trending higher. Corn was supported by some weather concerns. The soybean complex was dealing with Argentine rains reducing the crop. Wheat had shaken off much of this news on good production expectations, yet traders were cautious to push to new lows with support in other markets.
Then the U.S. and Canadian government reports on acreage and stocks resulted in a market slide. The weather broke and prices dipped further.
But last week, the market decided that was overdone. U.S. Department of Agriculture’s World Agricultural Supply and Demand Estimates report was not as bearish as some expected, and bargain buyers jumped in. A forecast showing some heat and dryness for producing areas brought back support.
The markets are sensitive during the growing season, as so much is unknown for eventual production and supplies, and the smallest piece of data or change in the forecast can cause a major market move.
Wheat
Wheat markets again pushed to a new low. USDA showed a huge increase in global wheat stocks, as a French shortfall was more than made up with higher production from Russia, the U.S. and Canada.
Global stocks were estimated at 983 million metric tons. The U.S. balance sheet continues to show huge supplies, with an increase in yield to 51.3 bushels per acre on top of the already expected rise in planted area.
Spring wheat conditions were lowered by USDA, with 70 percent of the crop rated good to excellent from 72 percent, previously. Some dryness and heat in the Plains have taken conditions lower, but remain very good from a historical perspective.
Winter wheat harvest in the U.S. is progressing at a normal pace after a slow start. USDA showed 66 percent of the crop was complete, compared to 65 percent for the five-year average, up from 58 percent a two weeks ago.
Durum
Durum prices dropped after a couple of weeks off the lows. No significant rally can be sustained with the market so well supplied, favorable growing conditions and overall wheat market weakness. USDA’s WASDE report showed an increase in ending stocks for 2016 to ’17 from the previous crop year of 5 million bushels. Some of the higher production will be used up with greater demand for exports, but a stock build has kept pressure on the durum market.
Canola
The canola market remains under pressure. Canadian growing conditions are favorable, with the crop getting plenty of moisture. Forecasts for output keep rising, and crush is up. This has kept the market well supplied.
In the U.S., condition ratings for the soybean crop have improved from a week ago, with 71 percent rated good to excellent.
While the soybean complex has firmed, one cannot ignore the fact that ratings are better than a year ago at this time, and last year saw a record yield in the U.S. at 48 bushels per acre.
Peas and lentils
Pea markets are now transitioning focus to new crop. Development is ahead of schedule in much of the world, including Canada. Saskatchewan Agriculture reported three percent of all the pulse crops sown this year are podding, with 69 percent flowering. France’s pulse harvest is fast approaching, and Indian farmers are planting more pulses than any first week of July in history.
Some concerns for the Canadian lentil crop are creeping up with excess moisture leading to disease development. The heat and excess rains have sped crop development in many areas, but farmers are being forced to apply fungicides to lentils (and other crops) to combat rising issues.
Mustard
May mustard exports were reported by the Canadian Grains Commission at more than 11,000 metric tons. This brings the 2015 to ’16 marketing year to date total to 99,300 metric tons (down from 106,400 metric tons for the same time period, a year ago).
Barley
The USDA’s balance sheet for barley showed a slight tightening of stocks for the 2016 to ’17 crop year. Both planted area and yields were reduced, taking production to 183 million bushels from a previous estimate of 193 million bushels.
With no changes on the demand side from the June report, stocks dropped to 87 million bushels. Barley conditions dropped modestly, according to USDA’s weekly report. The Crop Progress and Conditions report showed 74 percent of the crop rated good to excellent compared to 75 percent a week ago.

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