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Published September 09, 2013, 10:36 AM

Soybeans explode higher

Chicago Board of Trade soybeans traded 45 cents per bushel higher in overnight trade Sept. 2 and 3, as lack of rain is hurting filling.

By: John Duvenaud, Agweek

WINNIPEG, Manitoba — Chicago Board of Trade soybeans traded 45 cents per bushel higher in overnight trade Sept. 2 and 3, as lack of rain is hurting filling. Dryness is a serious issue through the western Midwest as far north as southern Manitoba. Soybeans had lost 50 cents the week ending Aug. 30, but gained much of it all back Sept. 3.

Soybeans turned bullish when the Pro Farmer crop tour came up with a 41.8-bushel-per-acre American soybean yield, under the U.S. Department of Agriculture’s 42.6 bushel projection.

Soybeans pull canola higher

The recent heat wave across the U.S. Midwest has caused the overall oilseed complex to incorporate a risk premium from the uncertainty in production. The late-seeded soybean crop has experienced adverse conditions during the critical pod setting stage, which has lowered yield potential. Analysts have tightened their fundamental projections for U.S. soybeans as a result of smaller-than-expected production and stronger year-over-year export demand from China.

Statistics Canada’s canola production estimate of 14.7 million metric tons was lower than the average trade estimate, but most traders continue to factor in a crop size near 15.5 million metric tons. Commercial line companies are anticipating a surge in farmer deliveries in the next month, which has kept a lid on the canola market. Basis levels in the country system have slowly weakened.

The Canadian crushing industry was running at 40 percent capacity the week ending Aug. 30; therefore, canola did not experience the full gains of the bean complex.

The domestic crush pace will pick up again later in September, but crush margins are under pressure, given the weaker vegetable oil values.

This factor will continue to temper the upside in the canola market.

Feed barley remains under pressure

Feed barley in Southern Alberta traded at $205 per metric ton delivered feedlot the week ending Aug. 30, as the market factored in the Statistics Canada crop estimate of 8.8 million metric tons. Corn futures experienced a minor rally. The main harvest pressure in the feed grain complex will come on the market during October.

Given the recent weakness in domestic feed prices, barley from central and northern Saskatchewan is now competitive into the Middle East relative to offers from the Black Sea region.

The problem is that major importers have the bulk of their nearby demand covered, with the Ukraine and Russian barley harvest wrapped up. We may see further weakness in domestic and export prices in the short term.

The Canadian barley carryout for 2013 to ’14 is projected to finish near 1.8 million metric tons, in line with the 10-year average. The function of the barley market is to encourage demand during the first half of the crop year.

The barley market has come off the all-time record highs experienced last spring and is still in a downward trend. We continue to project a surge in imports of U.S. corn and distillers dried grains with solubles during harvest, which will weigh on domestic feed grain prices.

Milling wheat trades sideways

Statistics Canada estimated nondurum spring wheat production at 21.8 million metric tons, up from 18.7 million last year. Milling wheat values have traded sideways as the world market digests the larger Canadian crop.

Similar to canola, we expect a surge in wheat deliveries during harvest. The commercial elevator system will be plugged. Interior basis levels are expected to weaken in the next month through the main harvest period.

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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