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Published June 24, 2013, 10:03 AM

Canary trade still slow

Canary continues the slow methodical pattern of trade it has had all winter. We’ve been on the verge of running out since 2011, according to the supply and demand tables, but somehow enough supplies keep coming to town to meet demand.

By: John Duvenaud, Agweek

WINNIPEG, Manitoba — Canary continues the slow methodical pattern of trade it has had all winter. We’ve been on the verge of running out since 2011, according to the supply and demand tables, but somehow enough supplies keep coming to town to meet demand. Prices are good — 26½ to 27 cents a pound — but nothing special given our supposed tight stocks.

Mexico continues to be a frustrating market. One would almost think, as some exporters believe, that Mexico is taking on the food safety import standards of the Netherlands.

Canadian canary exports do continue into Mexico, but with fewer and increasingly more disgruntled players.

That would be frustrating.

Demand is soft around the world. World economies are hurting and, in the big picture, it does appear that canary usage is suffering.

Plantings may be down substantially this spring. Some major growers have dropped canary in favor of crops with better yield potential.

Soybeans

American soybeans that are in the ground are looking good and are well-watered. In the Red River Valley, the soybeans germinated in a timely manner, despite the late seeding and cool soil. They’re up and off to a good start.

Prices are still good. Delmar is buying off Chicago Board of Trade November, and with November at $12.90, and a plus 68-cent basis, they’re paying $13.50 per bushel.

Delmar had been buying new crop at $12 per bushel and signed volumes. Now that price has slipped just below $12, which still might be looking pretty good come fall. There are few indicators of problems with global soybean production, other than the late seeding in North America. Even that has little correlation with poor yields.

Canola deliveries increase

Farmers across Western Canada increased deliveries the week ending June 14. Commercial supplies are increasing. It is not uncommon for farmer selling to come on stream late in the season when prices are strong and stocks are tight. Growing conditions have been favorable, and farmers are letting go of their “reserve stocks.” The domestic crush pace showed a marginal increase, but export movement remains light. While commercial supplies have increased, overall demand has declined, resulting in a softer market. Most companies are pricing off the November futures and basis levels are coming under pressure. We project old crop prices to generally soften into harvest.

For new crop, the market is focused on crop development. Recent rains have enhanced crop prospects and the long-term forecast calls for normal temperatures. The main canola growing regions of Saskatchewan and Alberta look impressive which has set a negative sentiment to new crop prices. The market risk premium caused by the unseeded area has been alleviated.

The upcoming Statistics Canada report is expected to show an increase in seeded acreage, compared with the March survey. The increase in canola is coming at the expense of wheat, where the new crop outlook has been bearish, compared with canola. The U.S. Department of Agriculture report was moderately bearish for new crop oilseeds. Similar to canola, there appears to be no major concern with upcoming U.S. soybean production.

Barley prices anticipating new crop

Cash barley prices came under pressure the week ending June 14. Domestic feed demand drops by nearly 30 percent from May to July because of lower cattle on feed numbers. Feedlots are liquidating fall placed calves and will carry historically low inventories through summer. Farmer selling has increased similar to canola. Seeding is wrapped up and prices are near historical highs; there is a large incentive to clean out bins. Crop conditions are favorable in Southern Alberta, setting a negative sentiment to the overall grain complex.

The new crop barley market is not well defined. Feedlot buying ideas range from $210 to $230 per metric ton, which has caused large variability in elevator bids. Export values for feed barley are at a discount to domestic feedlot bids. Many feedlot operators expect the export and domestic markets to trade at an equilibrium during harvest. Farmers in the major feeding regions will aggressively sell at harvest given the inverse in old and new crop prices.

Malt barley situation

Domestic malters have been offering attractive bids for new crop malt barley. But given the favorable crop conditions, we expect these bids to decline moving forward. World malt prices are under pressure, and if Western Canada experiences normal weather in July and August, malt barley supplies will be burdensome.

Editor's Note: Duvenaud publishes the Wild Oats Grain Market Advisory. For a free copy, call 800-567-5671

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