Canary trade steadyCanary trade is holding steady, but canary exports have dropped.
By: John Duvenaud, Agweek
WINNIPEG, Manitoba — Canary trade is generally steady. Mexico remains a difficult market to service, with its onerous weed seed restrictions, and a couple of main-line exporters have simply quit trying. But there are still exporters who export to another branch of the same business in Mexico so enough canary is getting through.
Canary exports are down significantly. Total global exports in 2007 to ’08 were 200,000 metric tons. That was the high. Exports were down to 126,000 metric tons in 2011 and 2012 and are on pace to hit 110,000 this year — 2012 to ’13.
AgCanada estimates the canary carryover in July to be 5,000 metric tons, but the actual amount is presumably somewhat higher.
Mild blip in lentils
Lentils normally show a bit of strength this time of year. Deliveries drop off as farmyards get muddy, and one sale by one processor can move the whole market, at least for a week or two, or three. It’s transition time for processors. They’re already starting to be thinking new crop when a new order comes knocking.
The latest rise has mostly been restricted to reds. That’s a trickier market to analyze than greens, since Canadian prices are so dependent on overseas conditions. The rise started three weeks ago and looked to be short-lived, but the strength is persisting. Reds trade at 26 to 27.5 cents per pound delivered.
Green demand is flat. Estons are the weaker green. A No. 1 still fetches 23 cents per pound delivered, not a lot more than a No. 2 Laird.
Canola prices remain firm
Cash canola values in Western Canada remained firm the week ending April 12, as tight available supplies along with seeding delays caused the market to incorporate a risk premium. The uncertainty moving into the final quarter of the crop year has commercial traders on edge because the domestic crush pace actually increased to 144,000 metric tons the week ending April 12, up from only 130,000 metric tons the previous week.
This suggests that demand has improved at these higher levels, which is something the market needs to ration through higher prices. Although the export pace is running 1.2 million metric tons behind last year, the steady pace of exports and domestic consumption suggests that the market will stay firm in the next month.
Seeding delays may increase canola acres because farmers will switch out of wheat, which runs into quality issues given the later harvest period. But markets do not like uncertainty in production issues and delayed seeding of canola and beans will be supportive for new crop prices.
Given the tight supply situation from the 2012 to ’13 crop year, the market cannot afford any problems with the upcoming crop and the futures will be extremely sensitive to adverse conditions.
Western Canada will experience below-normal temperatures in the next couple weeks and periodic rain and snow. The U.S. Midwest will experience similar conditions, so we can expect the markets to incorporate more of a risk premium.
USDA report supportive for durum
The U.S. Department of Agriculture lowered the U.S. durum carryout for the 2012 to ’13 crop year to 30 million bushels, which is basically the same as the 10-year average.
But for 2013 to ’14, U.S. durum acres are expected to be 1.8 million, 1 million acres below the 10-year average. The U.S. will have a tight durum situation in the 2013 to ’14 crop year and the durum market will be sensitive to Canadian production.
The U.S. market will need to trade at a premium to Canadian values to attract imports in the 2013 to ’14 crop year.
Durum prices will move in line with the overall grain complex, but we expect the premium over hard red spring wheat to increase next year. Both Canada and the U.S. are expected to increase hard red spring wheat acres, which will cause the carryouts to finish above the 10-year average.
But durum carryouts for both Canada and the U.S. will be sharply below the 10-year average.
China has reportedly bought more than 300,000 metric tons of U.S. soft red winter wheat, which has supported the overall wheat complex. There is potential for additional purchases in upcoming weeks. Adverse winter conditions in the hard red winter wheat region, along with the delayed seeding for U.S. and Canadian spring wheat crops, has resulted in a firmer tone for Canadian western red spring wheat prices.
The long term downward trend in the Minneapolis wheat that started in December has been broken and the lack of selling will result in corrective bounce.
Editor's Note: Duvenaud is the publisher of the Wild Oats Grain Market Advisory. For a sample issue, either call 1-800-567-5671, email firstname.lastname@example.org or visit http://canadagrain.com.