MarketsFarm — As dry conditions remained prevalent across the Canadian Prairies and U.S. northern Plains, despite recent precipitation, the markets were in a struggle between the weather and tightening supplies, according to Winnipeg analyst Wayne Palmer of Exceed Grain.
So far for the week of June 7, central and northern Alberta received rain, followed by parts of Saskatchewan and Manitoba a few days later.
As of Wednesday, more rain was in the forecast for the eastern Prairies, as well as parts of the U.S. northern Plains, but hot, dry weather was expected to return.
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Varied precipitation and warm temperatures were generally beneficial for crop development across Alberta during the week ended July 8, according to the latest provincial crop report released July 11.
“This rain has caused a little bit of warm, fuzzy feelings for the farmers to at least have a good start,” Palmer said.
As those regions struggle with dry conditions, the rains have been very timely — essentially saving the crops — he emphasized the importance of a strong finish come harvest.
“If we do not get a good crop, these prices are here to stay going forward. We have to have a good crop. If we have an average crop, we’re in a lot of trouble going forward.”
Given the extremely tight supply situations for canola, corn, soybeans and soyoil, “we have no backup supplies,” he said.
“We’re in a critical situation in that the world is looking at us to replenish not only North American grain stocks, but the world grain stocks as well.”
This means tight supplies, with help from dry conditions, would shift the markets from being focused largely on the weather to placing the emphasis on supply and demand, he said. When there is rain, the markets will react accordingly, most often pulling back prices.
The U.S. Department of Agriculture (USDA) supply and demand report, due to be released Thursday, will provide further guidance as to where ending stocks are headed.
“If that report shows even dangerously low ending stocks have depleted further, the weather situation is going to be put to on the back burners. We’ll go back to supply and demand,” Palmer said.
While that report will be felt in the canola market, more guidance for the Canadian oilseed will arrive at the end of this month, when Statistics Canada releases its next acreage report.
— Glen Hallick reports for MarketsFarm from Winnipeg.
