The Good: Part of the move higher for canola today was the catch up trade caused by the Canada Day holiday. This was not the only factor at play in the canola market, where hot temperatures continue to cover the Prairie region with temperatures in the 30s across the three provinces. There will be some relief from the excessive heat next week, but temperatures are expected to remain above normal at least until the middle of the month. This should not be good for canola (and other crops) that are currently in the reproductive growth stage. Another factor today was a rally in soybean oil, which is recovering from the biofuel meltdown two weeks ago. The main point continues to be that the canola market was expected to be tight with trend yields and the prospects for reduced yields are nothing but bullish.
The Bad: The spring wheat market closed higher today, so why is it put into the bad news category? The market reaction yesterday was sharply lower and trade early today tried to make up for the losses. This failed and although the spring wheat contract closed up two cents per bushel. Spring wheat crop conditions continue to worsen, but the markets feel that the deterioration has been fully priced in. The next significant report will be the July production estimates, which should provide some clarity on crop expectations for spring wheat. Pressure in the winter wheat markets continues to keep a lid on the ability of spring wheat to move higher. As usual, the markets will be looking to the forecast for further market direction.
The Ugly: The drought monitor from the U.S. released their recent map yesterday and the results did not improve as much as the trade was expecting. The drought area in the Corn Belt was reduced, but significant portions of Iowa, Minnesota and the Dakota’s remained in moderate to exceptional drought. The drought intensified in Montana and North Dakota this past week. Most of the PNW is now classified as being in extreme drought. The problem is that not only has it been dry, but the recent hot temperatures have increased the rate of moisture loss. Stressful conditions continue!