The Good: On a day when spring wheat headed for the hills, new crop canola posted some solid gains on the deteriorating conditions in the Prairies and Northern Plains. November canola futures closed the day at a new contract high of C$771.60 per tonne. The weather forecast is still calling for rains this week and the market may take back today’s gains in a blink of an eye. The weather premium is finally beginning to have an impact on new crop values with cash prices ranging between C$17 and C$18 per bushel. Crush margins remain strong at more than C$160 per tonne during this fall. This should keep buying interest in the canola market through the growing season.
The Bad: The spring wheat crop ratings dropped by five per cent to 38 per cent good to excellent. The irony is that the largest spring wheat state, North Dakota, managed to eke out a one per cent increase in crop ratings. The ratings in South Dakota dropped 29 per cent to just 16 per cent good to excellent. The crop in South Dakota was rated as 17 per cent headed, so the opportunity for recovery is going to limited in the coming weeks. By the way, North Dakota crop ratings are still the lowest in the past 20 years at this point of the growing season.
The Ugly: The market is certainly looking at the chances for rainfall this week as it is crucial for the region to get rains after the hot temperatures last week, One of the problems is that dry, hot weather is expected after the rains move through the Prairies. The central and northern Prairies have better chances of rainfall in the 8 to 14 day period, but the U.S. growing areas are definitely in the crosshairs of the drought. If these forecasts are correct, the spring wheat condition ratings are going to deteriorate even more by the end of June.