The Good: The main concern that we have been writing about over the past few months has been the drought in Western Canada and the northern U.S. It took a long weekend in the U.S. and a dismal forecast to change market sentiment, which allowed spring wheat futures to move up 42 cents per bushel in the September contract. The move pushed the contract to settle at US$7.7550 per bushel. The spring wheat crop needs moisture soon or crop prospects will decline rapidly. Remember that the U.S. spring wheat crop is generally one to two weeks ahead of Western Canada, so the need for moisture in the Northern Plains is very critical for the wheat crop. By the way, spring wheat conditions dropped two per cent to 43 per cent good to excellent. The state with the worst spring wheat condition is Washington with only 16 per cent of the crop in good condition and none rated as excellent. Keep an eye on white winter and spring wheat potential this year as the drought takes its toll on production in the PNW.
The Bad: Pity the poor canola crushers in Canada as the crush margin today dropped by more than C$10 per tonne! In most normal years, that would be a significant daily move, but this year it just means that the margin drops slightly to C$147.30 per tonne (using October soybean oil futures), which is still a near record. Blame the move in November canola today which saw the November contract close at C$738.80 per tonne. Interestingly enough, the canola futures did not keep pace with spring wheat, which moved up 5.73 per cent on the day, while canola futures were up by “only” 3.3 per cent.
The Ugly: If you were expecting to see a big change in subsoil moisture in the Northern Plains with the recent rains, be prepared to be disappointed. The North Dakota subsoil moisture ratings improved to 76 per cent short to very short. The problem is that this is after the “significant” rains in the state over the past 10 days. The problem is that the rains so far this season has only been only a break even proposition. This left the subsoil moisture situation with only a small net gain. With temperatures expected to move into the mid 30’s this week, crops are going to need a drink by the middle of the month.