The Good: Don’t look now, but the March oat contract was up 21 cents per bushel today. With the December contract about to reach options expiry, the March contract is taking leadership. The encouraging point for the oat market (unless you are a buyer) is that the March contract is taking leadership at a new contract high of US$7.63 per bushel. What oats knows is that supplies are short and demand remains strong. Oat prices will eventually return to earth, but new crops supplies still need to be assured. The last I checked, we are still six months away from planting the the 2022 crop.
The Bad: The spring wheat market seemed to have everything going for it today. A bullish IGC report indicated that world wheat production was lower than the estimates last month. Export tenders continue to provide support with Jordan coming in for 120,000 tonnes. This pushed the spring wheat March contract higher early in the trading session, but the attempt to push through the US$10.50 per bushel level failed. This caused the contract to sell off during the end of the trading session which dropped prices by 10.75 cents from yesterday’s close. The failure of wheat to break through the technical levels is a sign that the market is reaching a peak. Additional bullish news is needed to push the market higher from these levels.
The Ugly: Don’t look now, but North Africa is dry heading into the prime planting season for durum wheat in the region. The driest conditions are in Morocco, where most of the durum growing areas have received less than 50 per cent of normal precipitation. Parts of Algeria and Tunisia are also dry, but rains have been 50 to 80 per cent of normal. The growing season in North Africa begins when the fall rains arrive, so farmers are used to waiting for enough rain to support germination of the crop. The planting window stretches into January, but the “ideal” planting time is from November to mid December. Late planting can push crop maturation into the hot, dry period that usually begins in April and May. The last thing the world durum needs is a drought in North Africa during the upcoming year as Canadian production recovers from the 2021 drought. The problem is that the Canadian durum areas remain very dry as we head into the winter.