Canadian canary seed harvest underway
WINNIPEG, Manitoba — Canary harvest is 9 percent complete, according to Saskatchewan’s department of agriculture, but it looks as if it’s going to be a long harvest. West-central Saskatchewan, prime canary country, was dry all summer, and is now getting rain. If those plants start new growth, it could be a mess. In any case, expect harvest to still continue into October.
Exports this year, to Mexico and the rest of the world, are below last year. Trade is slow. It’s the same story we’ve been hearing for a year or more.
Importers are in caution mode with the strength and volatility in the U.S. dollar. It’s hard to calculate margins when you can’t be sure of the value of the currency you’re using. It seems as if importers are sitting on adequate stocks and became reluctant to add to inventory after canary prices started to surge in June. In mid-June, canary was 24 cents per pound, but it has been climbing since, probably because of dry conditions on the prairies. Late rains would have helped the canary crop, though it is far from a bin-buster.
Prices hit 30 cents per pound briefly this summer, but much of the pressure eased as the new crop started to be harvested. Some processors reported paying 30 cents briefly, but only to tide them over. Brokers report 30-cent bids were rapidly filled.
Prices have certainly moved up nicely. Prices are well above their five and 10-year averages. Seasonal averages suggest harvest lows occur about now — late August, early September.
Harvest pressure, this year, is right in front of us.
The argument for holding is the never-ending supply from Canadian farm storage has to be close to being cleaned up. There probably won’t be much warning of declining availability, as there is no coordinated coverage of those on-farm stocks. At the moment, it seems the pullback from importers is a bigger factor than the declining farm stocks.
The argument for selling is the general sense of uneasiness in the world. It’s got to be a bad situation when people stop feeding their canaries. Maybe we are in a deflationary phase in grain markets. Charts suggest that we’re well into bottoming action for many crops, but this process can take a year or two, and there’s nothing to say we couldn’t see another leg down.
Statistics Canada estimated stocks as of July 31 at 2.3 million metric tons, which was sharply higher than pre-report trade expectations. The government agency made upward revisions to production levels in the past three years to come up with the larger stocks estimate.
Traders are now thinking this year’s production also will be revised upward. Earlier in August, Statistics Canada estimated the crop at 13.3 million metric tons. The industry now thinks it could be closer to 14.5 million metric tons given the precedent to severely underestimate crop size. We mentioned in June that large farmer deliveries late in the crop year were not indicative of drought-like conditions. As it turns out, farmers had larger stocks on farm than the industry anticipated.
This latest report puts the market into a new fundamental structure. The larger ending stocks from the 2014 to ’15 crop year, along with potential for larger production of 14.5 million metric tons, lowers the probability for a significant rally later in the crop year. We are expecting the canola market to continue trending lower until harvest is completed. Later in fall, the market usually experiences seasonally strong demand, which could cause a correction to the upside. The upside potential, though, will depend on the world vegetable oil market.
Statistics Canada estimated July 31 nondurum wheat stocks at 6.1 million metric tons, down from 8.7 million metric tons in 2014. This number came within trade estimates, but the carryover stocks are lower quality. Therefore, the domestic market will have sufficient supplies of feed quality wheat in the upcoming crop year. The upcoming Canadian crop appears to be above average protein and favorable quality.
Western Canadian wheat prices continue to trend lower, given the burdensome world wheat stocks. World wheat production for 2015 is estimated at 726 million metric tons which is relatively the same as last year’s record of 725 million. All major exporters along with Russia and Ukraine have experienced a year-over-year increase in production with the exception of Canada and Argentina. We will see extreme competition on the world market during the 2015 to ’16 crop year.
Editor's note: Duvenaud publishes the Wild Oats Grain Market Advisory. For a free copy, call 800-567-5671 in Western Canada and North Dakota. All others call 204-942-1459.