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USDA outlook for large crops and lower prices

CRESTWOOD, Ky. -- Agricultural markets have fallen with large global supplies, and U.S. Department of Agriculture's Agricultural Outlook Forum forecasted ongoing large stocks in the U.S., and globally, for major commodities. Even with reduced pla...

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Wheat and money. iStockphoto.com

CRESTWOOD, Ky. - Agricultural markets have fallen with large global supplies, and U.S. Department of Agriculture’s Agricultural Outlook Forum forecasted ongoing large stocks in the U.S., and globally, for major commodities. Even with reduced planted area for wheat and no change planted area for soybeans, those stocks remain large.

Globally, demand is off from the Middle East, as weak crude oil prices have limited income for those importing countries. And competition for exports is very high, as many other countries outside of North America have large stocks of grain and oilseeds, as well.

Brazil and Argentina are harvesting corn and soybeans. Australia has decent wheat supplies, especially for an El Nino year, as do Russia, France and other sellers. Obviously, spring and summer weather could totally shift this narrative, but with decent weather expected, USDA is calling for markets to remain weak in 2016.

Wheat

Wheat markets have been under pressure, a trend that continued last week. The market is well supplied and exporters continue to discount to compete on the global market. In the USDA Agriculture Outlook Forum, Chief Economist Robert Johansson reported an expectation for 3.6 million fewer acres planted to wheat, yet ending stocks will continue to grow in 2016. The expected average price on the farm will drop from $5 per bushel in 2016 to ’17 to $4.20 per bushel. This comes even with an increase in export demand for U.S.-sourced wheat.

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Egypt had been a major concern in the past few months, as the world’s top buyer has blocked shipments because of unclear acceptable levels of Ergot fungus. Last week, however, sales resumed, and an additional tender for April delivery was issued to several countries (including Canada and the U.S.). In a time of extreme competition for sales, the resumption of Egypt’s usual buying patterns is a relief.

Durum

After a couple of weeks of firmer prices, durum fell lower. The market has been pulled by overwhelming pressure from broader wheat markets, as well as comfortable supply for the durum market.

Algeria made a significant purchase of durum last week. But because of the cheaper cost, the source of durum was Mexico, which only ships about 1 million metric tons per year. The purchase was anywhere from 280,000 to 400,000 metric tons, and was priced lower than Canadian or U.S. sourced durum.

Canola

Canola markets were off, as China’s quality policies are unclear and impacting exports. The Canadian Grain Commission reported 282,000 metric tons of seed shipped to China in January, but unclear regulations on quality will impact sales in the future. Crush in January was strong at 179,000 metric tons.

One issue is high soybean oil prices in the U.S. and a lack of Chinese demand could lead to a shift in usage in the U.S. to use canola. Until that happens, look for weakness to continue for canola. Farmer selling has been slowed because of the lower markets, as well. European rapeseed markets are also under pressure, finishing 3.50 euro lower.

Peas and lentils

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Exports of field peas from Canada have been strong to start 2016. The CGC reported January at a record 250,000 metric tons and the first three weeks of February totaled an impressive 155,000 metric tons. That is a 15 percent increase from January 2015.

Total shipments for the 2015 to ’16 marketing year have now reached 1.61 million metric tons, compared with 1.53 million metric tons in the first six months of the 2014 to ’15 marketing year.

The lentil market has remained firm. Demand has been steady, but support is coming from moisture concerns for Canadian growers. In southern Saskatchewan, precipitation has been less than 60 percent of normal in the past two months, and less than 85 percent of normal for other lentil-growing areas.

While it is important to remember that the crop is not made in February, and moisture throughout the spring and summer will be much more important, it does set the stage for the market to be concerned heading into the planting season.

Mustard

The CGC reported 1.9 thousand metric tons of mustard seed loaded for export in January, which is above the 1.2 thousand metric tons from January 2015 but below December’s 3,300 metric tons.

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