Canola digests USDA reportCanola sees selling pressure, malt barley looks good
By: John Duvenaud, Agweek
WINNIPEG, Manitoba — Canola futures came under heavy selling pressure March 28 after the U.S. Department of Agriculture stocks report showed that U.S. soybean supplies as of March 1 were larger than traders’ expectations. Canola crush margins deteriorated as soybean oil and soymeal futures traded lower; therefore, we project the average weekly domestic crush pace to decline in upcoming weeks.
Producer deliveries into the commercial system continue to stay strong and it appears that domestic crushers and exporters have their nearby requirements covered. Basis levels are expected to ease later in spring because of slower domestic and export demand.
Canola prices will continue to move in line with the bean complex, despite a historically tight carryout. South American beans are coming on stream more readily as harvest progresses and port congestion improves.
End users of feed wheat in southern Alberta were paying $291 per metric ton delivered the week ending March 29.
Despite the weaker milling wheat prices, feed wheat values have stayed relatively firm because farmers are hesitant to sell milling wheat into feed channels. This attitude will likely change in upcoming weeks and feed wheat prices will start to trend lower.
U.S. wheat and corn stocks as of March 1 were above traders expectations, which will cause feedgrain prices to trade lower into late spring and summer. We are projecting a year-over-year increase in Canadian wheat stocks when Statistics Canada releases its March 31 stocks report in May. There is a fair amount of wheat that needs to move off farm before the end of the crop year.
Larger US wheat acres for 2013
USDA prospective plantings report showed a year-over-year increase in spring and winter wheat acres. Conditions in the hard red and soft red winter wheat regions have improved with the recent moisture and the market is starting to factor in larger supplies for the 2013 to ’14 crop year. Keep in mind the U.S. winter wheat harvest is only two months away and U.S. farmers sell half of the winter wheat in the summer months.
Wild Oats is projecting a 3 to 5 percent increase in Canadian spring wheat acres.
Hold feed wheat
Fundamentals say sell. Wheat prices are great. It looks like a lot more grain is around and even more is coming.
Corn stocks were tight after last summer’s American drought. Prices have been great since last August and South America planted fence row to fence row.
Weather was generally decent and now the country is harvesting a gargantuan crop. It’s moving into export channels as fast as the trade can get it shipped.
New crop prices are at a serious discount to old crop. The market says we’ll have lots this fall and prices will be considerably cheaper.
Old crop corn stocks had been thought to be tight. Physical buyers are paying 30 cents over futures for corn. It was thought that only Argentine corn imports and newly harvested soft red winter wheat would keep the feeding industry going.
Now USDA has found another 400 million bushels of corn — 30 million metric tons. It appears the carryover this fall will be comfortable. Long grain funds lost $2 billion in this meltdown. They’re bailing out.
Markets looked bleak at this time last year as well. Everyone knew there was going to be a cracker jack American corn crop and prices would be cheap in fall 2012. We know where that went.
The 2013 North American crop isn’t even in the ground, and between a foot of snow on the prairies at the start of April and a dry Midwest subsoil, it’s no shoo-in. Global stocks of feed remain tight.
Ethanol production and feeding are suddenly profitable and exports may pick up with corn 90 cents cheaper.
Malt barley looks good
There will be little malt barley carry-in on the prairies — the lowest in 20 years. With the probable late seeding, it may be September before significant new crop is available.
Most western Canadian malt is two-row and that’s what you want to be growing, at least from a marketing perspective. It’s true that six-row is in demand from American maltsters, but two-row can go anywhere.
Six-row is almost a speciality malt.
Metcalfe is the tried and true two-row variety with widespread acceptance, both domestically and foreign. Meredith is the new variety. It is not yet universally accepted, so you may want to have a contract if you’re growing this. For Copeland and Newdale, be sure you have it contracted.
Malt demand remains strong. Domestic maltsters are always buying and there are good export markets to China, the U.S., Columbia and South Africa.
Editor's Note: Duvenaud is the publisher of the Wild Oats Grain Market Advisory. For a sample issue, call 1-800-567-5671, email firstname.lastname@example.org or visit http://canadagrain.com.