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Published January 28, 2013, 10:29 AM

Canola edges higher

Canola futures moved higher the week ending Jan. 18 on technical related buying and spillover strength in soybeans.

By: John Duvenaud, Agweek

WINNIPEG, Manitoba — Canola futures moved higher the week ending Jan. 18 on technical related buying and spillover strength in soybeans. The Argentine weather forecast for the soybean region remains dry for the next two weeks, which could trim yield prospects. At the same time, Chinese demand for U.S. soybeans continues to step forward, while we have seen a resurgence in soymeal exports. It looks like the U.S. soybean fundamental structure will be tighter than earlier anticipated and oilseed markets are incorporating a risk premium because of dryness in Argentina. The speculative funds have been active buyers, as well, with the canola futures above the 20-day average.

The domestic canola crush has slowed down recently, given the poor margins and softer world vegetable oil values. Basis levels remain strong, as exporters and crushers struggle to cover their nearby requirements. We are currently 60 percent sold on the 2012 crop. This is a good time to catch up on sales.

Mustard

Mustard prices aren’t bad –— they’re generally higher than at any time after 2009 — but they are also flat. More important, new crop bids are at the same level as old crop. That means there is little point in holding mustard for short-term price gains.

AgCanada’s mustard supply and demand is mildly positive. The carry-over continues to shrink, although it is nowhere near being tight.

The unknown for 2013 is the amount of seeding on the prairies.

As it stands, prices are competitive and soil moisture is generally fine. Seedings should be steady.

Old crop yellow occasionally hits 40 cents per pound, while new crop bids are 38 cents for delivery before Dec. 31 and up to 40 cents for delivery at buyer’s option to July. You should be able to find 40 cents if you give a bit on delivery, but 40 cents will be hard to find if you want to move volumes. Brown is 34 to 35 cents spot with new crop at 35 cents. Oriental trades at 25 to 27 cents and is hard to move.

Lentils

These aren’t great prices, but they are unlikely to improve any time soon.

The best thing you can say about the lentil glut is that the trade is working to move them. Exports are running at record levels. That said, supplies remain onerous. AgCanada places total supplies at north of 2 million metric tons. In a way, it’s kind of nice to have food reserves of that quality and magnitude in the country. The downside, of course, is that prices are about at the cost of production, if that.

With supplies this big in the major global exporter, don’t expect to see much for price improvement, at least this winter. Presumably, plantings will be sharply lower this spring and we can start working our way back up.

No. 2 Lairds trade at 18 cents per pound delivered. These always trade, but no processor is reaching.

No. 1 Estons are 24 cents delivered. These are harder to source. Processors report a lot of trouble with earth tag on Estons. Pieces of dirt are hard to clean out of lentils, no matter what type of equipment. That has hurt exports to every buyer, but to Mexico in particular. Mexico has zero tolerance for dirt.

Prices for reds went up to 20.5 cents per pound on some good sales into Bangladesh. Lots of reds were available to the trade at that level. They’ve subsequently come back to 18.5 to 19 cents per pound.

Durum

Tunisia held a durum tender the week ending Jan. 18 for 75,000 metric tons of No. 3 Canadian western amber durum equivalent quality, which traded from $393 to $406 (U.S.) per metric ton cost and freight. This sales level confirms the price structure in the elevator system, and it will be difficult to see higher prices later in the crop year.

U.S. durum offers are a sharp discount to Canadian prices for March forward shipment positions. While the Canadian durum carryout will be below the 10- year average, the U.S. durum fundamental structure is rather burdensome. U.S. processors are well-covered through March, resulting in lower nearby demand.

High protein milling wheat

Minneapolis wheat futures have strengthened for two main reasons since the recent U.S. Department of Agriculture report. Tighter U.S. corn stocks along with adverse weather in Argentina has caused all feedgrain and wheat prices to rally. Second, the weather outlook for the U.S. hard red winter wheat region remains dry.

Protein premiums have been historically weak this crop year because U.S. and Canada spring wheat crops were above-average protein. However, basis levels for 14 percent or higher protein wheat will likely strengthen in the 2013 to ’14 crop year if normal growing conditions materialize.

Minneapolis December 2013 wheat futures are trading near $9 per bushel.

Editor's Note: Duvenaud is the publisher of the Wild Oats Grain Market Advisory. For a sample issue, call 1-800-567-5671, email admin@canadagrain.com or visit http://canadagrain.com.

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