Canary trade flatCanary markets are stabilizing after a good run-up from last summer’s lows.
By: John Duvenaud, Agweek
Canary markets are stabilizing after a good run-up from last summer’s lows. Canary had dropped as low as 21 cents per pound last August, but has moved up smartly since. Trade now is generally 26 to 27 cents per pound freight on board farm Saskatchewan. Processors are buying.
Production has been dropping since 2009 when we produced 197,000 metric tons. Production in 2010 was 154,000, 2011 was 129,000 and 2012 was 125,000.
The carryover next July is estimated by AgCanada to be 10,000 metric tons, rock bottom. The real carryout is presumably higher since considerable canary would have been placed into long-term storage the past two years.
Canary markets continue to be hobbled by the food-grade import restrictions imposed by Mexico. It’s hard to export to Mexico with its rigid and exacting weed seed limits.
With tight margins, only the bigger players even bother with exporting to Mexico any more. That’s bearish, short-term, but Mexican demand has probably not dropped by much. Canary markets are currently about flat, but charts show a strong uptrend since August.
Bean acreage to plummet
The North American edible bean crop was good. Manitoba had 138,000 acres — a big crop, plus it was very good. Ontario had a good bean crop and the U.S., while hit and miss, was also above average. There are lots of edible beans in North America.
End users have been sitting back, unwilling to make any new crop commitments. The few contracts that are available are being made by local merchants, without the backing of end users. Bids are in the low to mid 30-cent area.
Soybeans pencil close to edible beans and are far easier to grow.
Lots of prairie farmers are going to abandon edible beans this year. North Dakota and Minnesota are on track to drop a third of their acres. Bean plantings can be highly variable and 2013 will be a low acreage year. Stocks are currently more than adequate, but unlikely to last into 2014.
Pintos are a better play than blacks. China can now sell blacks directly to Mexico and has pretty well taken over that market. Pinto production, on the other hand, for export, is mostly in North Dakota, Manitoba and Alberta.
Canola market consolidates
Canola futures have been trading sideways. Fresh export demand has subsided, given the weakness in the world vegetable oil complex. Malaysia cut the export tax on palm oil in an effort to enhance exports. This will continue to weigh on vegetable oil prices. Brazilian soybean growing conditions remain optimal, while forecasts for the Argentine soybean region are on the dry side. This dryer forecast, along with Chinese demand for U.S. soybeans, has sparked a rally in the soybean market, which spilled over into canola early last week.
Basis levels in Western Canada remain strong, as domestic crushers work to entice farmer selling. We’ve seen no real slowdown in the domestic crush pace, but given the lower crop size, it is inevitable that the crush slows later in the crop year. The March May spread continues to trade at an inverse, reflecting the tight nearby stocks.
Feed barley and feed wheat
Cash barley prices in southern Alberta continue to hover in the range of $275 to $280 per ton delivered. Cattle on feed numbers through fall have been down 7 to 10 percent, which has resulted in a year-over-year decline in feedgrain demand. Given the recent drop in the wheat market, feedlots are implementing low protein milling wheat in the rations, which will also result in lower barley usage.
Feed barley exports are running ahead of last year, but world values have come under pressure from more aggressive offers from Europe.
Turkey recently bought 200,000 metric tons of feed barley at a $327 (U.S.) per metric ton cost and freight. Tunisia also bought feed barley at a $322 per metric ton cost and freight. This equates to approximately $200 in central Saskatchewan.
These sales will be filled with European barley. Export values for feed barley and feed wheat are below domestic prices.
Malt barley prices in Western Canada have been in the range of $6 to $6.40 per bushel depending on location. Given the world malt values, it will be difficult for prices to increase in the next couple months.
Domestic malsters appear to have their nearby requirements covered. We hear certain grain companies are currently looking for coverage on current sales. This buying interest will subside once these sales are covered.