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Published September 03, 2013, 10:02 AM

Peas are coming off

Peas are coming off in volume and prices are easing lower. That said, those prices are still pretty good in the big picture.

By: John Duvenaud, Agweek

WINNIPEG, Manitoba — Peas are coming off in volume and prices are easing lower. That said, those prices are still pretty good in the big picture.

Canada had run out of peas before harvest. There were still 50,000 metric tons of yellows in the system, from a crop of 2.8 million metric tons, but virtually no greens. Trade had ground almost to a halt. Overseas buyers had been buying forward contracted new crop peas from the trade earlier this summer, but that recently slowed right down. Now that harvest has started overseas business is again being written.

The crop looks good. Yields are good to fabulous with 60 bushels per acre, which is not uncommon. Quality is also good — not as good as last year but still quite decent. There is some bleaching.

Yellow quality is exceptional.

Prices are all over the map. Yellows are being bought somewhere between $6 and $7.50 per bushel. Greens are trading between $8 and $11, although you’ll have trouble finding $11. Most trade between $9 and $10. Processors with sales for peas that they have to source are paying up smartly.

Processors buying on spec are letting farmers deliver new crop at a price.

One negative in yellow pea demand is the continued collapse in the Indian rupee. That country, the largest single buyer of Canadian peas, has financial problems. It tried a couple of years ago to buy off its farmers with above-market guaranteed wheat prices, then subsidized wheat exports in an attempt to move the overage, which they can’t properly store, and are now facing even cheaper wheat offers from western grain companies selling directly into their traditional markets.

Even worse, the rupee is continuing to make new lows, almost daily. It fell by 7 percent in the past month.

Demand for greens should be firm for some time. There’s no carry-in.

The 2013 crop may be 600,000 metric tons, which is marginally above normal usage.

Harvest pressure is on right now. Odds are that pea prices will be higher this winter.

Lentil harvest started

Lentil harvest has started with excellent quality and decent yields.

Trade that had virtually ground to a halt prior to harvest is only gradually picking up and is still slow. You should be able to get 18 to 18 ½ cents per pound for a No. 2 Laird and 20 to 21 cents for reds. Seasonal charts suggest prices will increase in September, after harvest pressure eases.

Looking forward on canola

The oilseed complex has been in a downward trend, given the larger production of Canadian canola and U.S. soybeans. World vegetable oil supplies have been growing, which has added more pressure to canola prices. Looking forward, we are going to be patient with further sales for the following reasons.

The Chinese soybean crop experienced significant heat during the key-pod setting stage, which will increase its import demand. Chinese demand for soybeans and canola is expected to increase in the upcoming crop year, influencing the overall price structure. Canadian canola experiences the strongest demand for exports and the domestic crush during November and early December. Major buying has yet to step forward.

Wild Oats had earlier been expecting a year-over-year increase in the U.S. soybean carry-out for the 2013 to ’14 crop year. Now it may be smaller.

The soybean complex needs another large crop from South America.

Wheat and durum

While the wheat complex has been in a downward trend since January, stronger basis levels have tempered weakness in the cash market. Basis levels for spring wheat are always the weakest during August and September. Basis levels generally start to improve later in fall. At the same time, the futures market generally makes a seasonal high in early November prior to the Australian harvest. World wheat production for 2013 to 2014 will experience a year-over-year increase from 2012 to 2013. But the world wheat carry-out for 2013 and 2014 will be 172 million metric tons, which is basically the same as last year and down from the five-year average carryout of 186 million metric tons. Next spring, the oilseed complex will function to encourage production, but given the tighter world wheat carry-out, the wheat market cannot afford lower wheat acres in 2014. We are expecting a seasonal rally in canola during March and April and wheat will be pulled higher, as well.

The wheat complex will be sensitive to growing conditions in the Northern Hemisphere next spring. If there is a dryer region, the market will also strengthen because of the uncertainty in production coming on the heels of tighter stocks.

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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