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Published May 13, 2013, 10:43 AM

Summer arrives

Many farmers are wondering why the market dropped $20 per metric ton after analysts forecast a historically tight carryout for 2012 and 2013 and a year-over-year decline in canola acres.

By: John Duvenaud, Agweek

WINNIPEG, Manitoba — There never was much of a spring. Two weeks ago, it was still winter. Today it’s like summer. Seeding is above 5 percent in southern Alberta and started in southwest Saskatchewan.

There’s plenty of moisture in the ground.

Canola stocks tight

Statistics Canada’s March 31 stocks report showed only 3.9 million metric tons of canola in Canada, down 25 percent from a year ago. Normal canola usage April through July is 4.45 million metric tons.

March 2012 March 2013

Canola 5.202 3.909

Durum 3.087 2.663

Oats 1.731 1.214

Barley 3.28 2.961

Rye 0.089 0.12

Flax 0.327 0.264

Peas 1.085 0.872

Mustard 0.141 0.1

Sunflowers 0.014 0.063

Lentils 1.154 0.907

Canary seed 0.062 0.056

Chickpeas 0.047 0.111

Canola market digests stocks report

Canola prices came under pressure the week ending May 3, despite the lower stocks report. Many farmers are wondering why the market dropped $20 per metric ton after analysts forecast a historically tight carryout for 2012 and 2013 and a year-over-year decline in canola acres.

Cash canola prices have been at historical highs and the market is functioning to ration demand. The weekly canola crush pace was only 114,000 metric tons for the week ending May 1, compared with more than 140,000 metric tons earlier in the winter. At the same time, the export pace has slowed and will likely decline further later in the crop year. Demand is waning rather than strengthening, which will result in softer prices. For the market to move higher, buying has to increase at the higher levels, but we don’t see this happening.

South American soybean exports are improving and the U.S. will increase imports of Brazilian beans to satisfy tight fundamentals. The upward momentum in the bean complex has been alleviated and with improving seeding conditions forecast for this week, the risk premium in the soybean complex will erode. We may see additional volatility in the canola market, but the highs in the cash market are likely in place for the 2012 to ’13 crop year.

Barley stocks same as last year

Statistics Canada reported barley stocks down slightly. Feed usage is similar to last year, while exports are up 200,000 metric tons. Cash barley trades at $293 per metric ton delivered southern Alberta and the market has been stable through spring. Wheat used for feed was up almost 1 million metric tons, compared with last year.

Feedgrains had incorporated a risk premium from the uncertainty in production. However, forecasts look more favorable, which will allow rapid seeding. Once the corn and barley crops are more than 50 percent seeded, the market will come under pressure as moisture is favorable. Feedgrain will be abundant for 2013 and 2014.

Durum premium over spring wheat to hold

Old crop durum prices for No. 1 Canadian western amber durum at 13 percent protein remain above $8 per bushel while new crop is $7.25 to $7.60. The market is telling farmers not to hold old crop durum into the new crop year. French new crop durum trades at a $50 per metric ton discount to current Canadian offers.

Prices for No. 1 Canadian western amber durm at 13 percent protein are running nearly 50 cents per bushel above No. 1 Candian western red spring wheat at 13.5 percent protein.

The Canadian durum carryout will finish sharply below the 10-year average. The nondurum spring carryout in Canada and the U.S. will be above the 10 year average. For new crop, expect longer term pressure on the overall wheat complex, but the durum premium over red spring wheat should hold.

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 www.canadagrain.com.

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