Canary markets steadyIn this week's Wild Oats column: updates on canary, wheat and canola
By: John Duvenaud, Agweek
WINNIPEG, Manitoba — Canary markets have been fully steady all summer at good prices — 27 to 28 cents per pound. It’s easy to sell canary.
The downside is that prices aren’t even better. AgCanada has the carryover at 15,000 metric tons, which is tight. Not, however, tight enough to allow prices to break through to the upside.
One difference between the canary market of today and that of 10 years ago, the last time canary came close to 40 cents, is that there are far fewer players in the canary trade. Further, few of this smaller number of traders are willing to make uncovered sales so almost no trader is forced to pay whatever it takes to fulfill their contract.
Prices are good but there is no panic buying.
That said, Canadian processors are generally well sold. International buyers are keeping current.
The big increase in proso millet plantings in the United States will go some way toward easing new crop demand for canary. Plantings went from 330,000 acres in 2012 to 530,000 acres this year. While not a direct competitor to canary, proso millet can certainly be substituted for canary in mixed birdfood. Plantings were so high because of the great price. Proso millet trades higher than canary.
The Mexican market continues to frustrate. Exporters playing by the rules say they cannot compete but exports continue nonetheless. That’s a bit disconcerting. From a farmer’s perspective, anything that disrupts trade is a negative. Mexico is one market where there definitely are fewer players.
Global demand for canary does appear to be easing lower, presumably because of the financial woes endemic in the non-ag world since 2008.
Canary trades about 27 to 28 cents freight on board farm, which historically is near the top of the range. Almost all canary that has traded in Saskatchewan in the past 10 years has been 10 to 30 cents a pound.
Fundamentals suggest canary prices are unlikely to weaken. The 2013 canary crop is 65 percent the size of last year’s crop, so there’s optimism about prices going forward. But we’ve been hearing about the canary shortage for so long the story is almost stale. Nevertheless, canary is losing acres to crops with better yield potential, and prices appear to be moving to a higher average level.
Certainly — knock on wood — the days of 10-cent canary have gone the way of horses and binders and the Winnipeg Commodity Exchange trading floor.
New crop milling wheat
In the past year, record high corn prices supported the wheat complex.
But last week, we saw elevator corn bids across the U.S. Midwest drop $1 per bushel as the market anticipates the larger corn production.
The floor in the wheat market has given way, which leads to lower prices during harvest.
Prices have been trending lower but are still relatively strong from a historical perspective.
Given the world fundamental outlook for wheat and coarse grains, we could see an additional decline of $1 per bushel in Western Canada elevator bids in the next couple months.
Western Canada’s nondurum spring wheat crop has potential to be 5 million metric tons larger than last year. Given the current weather and crop conditions, approximately 80 percent of the wheat crop will grade in the top two milling categories causing the spring wheat premium over winter wheat prices to erode. Hard red winter values in the U.S. have been held up because of Brazilian demand, but this will fade later in fall.
Weaker corn prices, longer term bearish wheat fundamentals and a high-quality Canadian crop points to lower prices later in harvest.
Canola: Waiting for a bounce
Favorable weather has caused many analysts to increase their production estimates. The Canadian canola crop could exceed 15 million metric tons. We are going to see record canola deliveries from September through December, which will cause basis levels to weaken.
The U.S. soybean crop is also developing under favorable conditions. But the key pod setting stage will occur during the first half of August. The oilseed complex has potential to incorporate a risk premium if adverse weather materializes during this time. We are waiting for this bounce in the market to add to our sales recommendation.
Longer term, the oilseed market is bearish. Given the recent price activity, we could see cash canola bids in the country system drop $50 per metric ton from current levels between now and October.
Editor's Note: Duvenaud publishes the Wild Oats Grain Market Advisory. For a free copy, call 800-567-5671.