The USDA released its monthly World Agriculture Supply and Demand report last week. This March report is the last data before the big Prospective Plantings and Quarterly Grain Stocks reports that are released on March 31. Until that report, the market is focused on these estimates for old crop, as well as weather and trade estimates for how many acres are planted to each of the major crops.
The report itself saw little change in the U.S. balance sheets. Globally, supplies are large and increasing. Higher wheat output from Argentina and Australia was more than enough to offset a small drop in Western Europe. And both corn and soybean output from South America were up from the February report, as well as the pre-report trade estimates. The market viewed the report as bearish, with prices of all major agriculture products on the defensive.
Wheat
Wheat markets have been relatively quiet, with day-to-day fluctuations in prices leading markets in a sideways trading pattern. The competing market forces of lower planted area for the winter crops and need for rain versus large domestic and global stockpiles have resulted in little overall market change since the initial rise from the lows in January. Look for weather forecasts and actual rainfall totals to be the main driver for prices in the near term, and the planting intentions for spring wheat (the USDA report at the end of March will hold this data) to be the key drivers.
Durum
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The durum price ticked modestly lower in Minneapolis this week. The market has been dealing with large stocks for several months, keeping price movements limited.
Canola
After a major rally in soybean oil lent support to the canola market last week, some pressure has taken back some of the previous gains. The unclear nature of the Renewable Fuels Standard and tax credit deal with the Trump administration made the oil rally unsustainable. Also, the realization that soybean supplies are already quite large and planted area in the U.S. is expected to be huge resulted in lower soybean oil prices. That being said, canola has its own fundamental factors that kept prices from falling too much in sympathy with the broader fats markets. Demand for canola remains strong: The U.S. imported almost 1.47 billion pounds of canola oil from October through January. It is also not clear just how much canola was left in the fields with last year's poor October weather in Canada. The market will be focused on planting conditions and expected area in the month ahead.
Peas and lentils
A huge boom in pulse production came in 2016. With declining grain prices and strong global demand for peas and lentils, farmers focused area in Canada, parts of the U.S. and across the globe to these other crops. Huge production and rising stocks helped meet this demand. It now looks like the bump was only for a year, as area and production will likely decline in 2017 (outside of India, which is planning to become self-sufficient over the next few years and is therefore increasing production). Total output is expected to drop from 55.6 million metric tons in 2016 to 54 million metric tons in 2017. Prices are reflecting a drop in demand and the higher stock situation, with the STAT Publishing world pulse price index dropping 11 percent from February 2016 to February 2017.
The aforementioned move of India to become self-sufficient in pulses is playing out before the market's eyes. The ten year exemption that allow Canada's pulses to ship without fumigation of methyl bromide (a banned substance in the U.S. and Canada) is set to expire at the end of March. By the end of the week, an extension may be put in place, according to some Indian officials. However, the Canadian government will likely need to provide an equally effective alternative to methyl bromide. Pulse prices have been slightly lower as the prospect of lower demand pressures the market.
Mustard
India's output of mustard seed is expected to jump in 2017-18, according to the U.S. agricultural attaché. Increased planted area due to steady prices from a year ago will bump up output considerably. Combined with rapeseed, output is forecast to rise 15 percent from the 2016-17 crop year.
