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Published May 20, 2013, 10:46 AM

Mustard plantings higher

There has been a huge slug of lentil exports in the past month. India stepped into markets with a purchase of North Dakota Richleas, then the action moved to Canadian Lairds.

By: John Duvenaud, Agweek

WINNIPEG, Manitoba — With both old and new crop yellow trading at 40 cents per pound, and brown at 36 to 37 cents, mustard has become a profitable option for 2013.

Statistics Canada projected mustard plantings at 345,000 acres, up 3 percent from last year. The trade thinks actual plantings could approach 400,000 acres. In addition to good prices, mustard can be seeded a bit later than most crops.

Viterra ran out of mustard seed and is buying from additional seed growers. There probably isn’t any mustard seeded yet, but the first fields were expected to go in last week. As has been the case all winter, new crop contracting is not happening, at least not much. You’re looking at similar old crop and new crop bids so from the farmers’ perspective, there seems to be little advantage in contracting. The trade is looking at already-high prices and few are willing to commit at these levels, especially when it looks like there will be adequate plantings.

Statistics Canada’s stocks report for the week ending May 10 had March 31 mustard stocks at 100,000 metric tons, down from 141,000 last year. Canadian stocks have moved from burdensome to, maybe not snug, but certainly moving in the right direction. AgCanada puts the mustard carryover in July at 30,000 metric tons. That’s the smallest mustard carryover in years.

Surge of lentil exports

There has been a huge slug of lentil exports in the past month.

India stepped into markets with a purchase of North Dakota Richleas, then the action moved to Canadian Lairds. Indians are buying North American lentils because its pigeon pea and red lentil supplies are tight.

Green prices had a mild spike higher in early May, but are back to 23 cents on a No. 2 Laird. Red prices had been strengthening all winter and had moved to 27.5 cents, but are back to 25 cents per pound. It could be hard to find a red buyer at the moment.

There were so many lentils moving through Vancouver, British Columbia, in late April and early May that the railroads stopped delivering when the stuffers couldn’t get the cars unloaded. Containers came to be a limiting factor.

Few farmers are delivering lentils these days. Now that seeding has started, nobody is hauling and trade is mostly suspended.

Canola demand slows

The weekly canola crush came in at 93,000 metric tons, as Canadian canola plants are now running at only 56 percent capacity, compared with 85 percent earlier in winter. Given the tighter supplies, the market continues to ration demand, which will eventually cause the cash market to trend lower.

Farmer selling has slowed, causing commercial supplies to decline. After seeding, expect an increase in selling, even with ending stocks historically low.

The U.S. Department of Agriculture report was bearish for new crop oilseed prices. U.S. soybean production is expected to increase by 400 million bushels over 2012, which will result in a carryout of 265 million bushels. This compares to the 2012 to ’13 carryout of 125 million. Canola fundamentals will remain snug in the upcoming crop year, but the increase in world soybean supplies will temper the upside in domestic canola values. New crop soybean and canola values have stayed firm because of uncertainty in production and the market will be sensitive to weather during the growing season. With normal conditions, we could see new crop soybean prices drop by $1 to $1.50 per bushel, which would cause canola prices to decline by a similar amount.

Bearish outlook for grains

U.S. and world coarse grain production is forecast to increase sharply in the 2013 to ’14 crop year. World corn production is expected to reach 965 million metric tons, which compares with the 2012 crop of 857 million metric tons and the seven-year average of 790 million metric tons. The major increase in production is coming from the U.S., which will cause the 2013 to ’14 carryout to exceed 2 billion bushels.

Tight corn supplies have been the major factor supporting Canadian wheat and barley markets. But given the current fundamental outlook, we would not be surprised to see Midwest corn prices less than $4 per bushel during the fall period. The feedgrains complex will function to encourage demand through lower prices. The price floor will be sharply lower for barley and wheat.

World wheat production could also reach a record 701 million metric tons, compared with the 2012 crop of 655 million metric tons and the seven-year average of 648 million metric tons. Despite adverse conditions in the U.S. hard red winter wheat region, other major producing regions of the world are in fairly good shape.

The fundamental structure for corn and wheat suggests that December corn futures will trade in the range of $3 to $4 next fall; historical spread relationships suggest that Chicago wheat would trade in the range of $5 to $6; Kansas wheat in the range of $5.75 to $6.75 and Minneapolis wheat in the range of $6 to $7.

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

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