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Published September 30, 2013, 11:02 AM

Soybean harvest in full swing

The Manitoba-Saskatchewan harvest is in full swing. Elevators in soybean country are concentrating on taking delivery of soybeans and basis levels are still decent.

By: John Duvenaud, Agweek

WINNIPEG, Manitoba — The Manitoba-Saskatchewan harvest is in full swing. Elevators in soybean country are concentrating on taking delivery of soybeans and basis levels are still decent.

The average soybean basis in Manitoba was 75 cents per bushel under Chicago Board of Trade soybeans the week ending Sept. 20, which is very much on the tight side. Generally basis levels are more than $1 per bushel and can be up to $1.50 under Chicago Board of Trade.

These good basis levels are already expanding — they’re up to $1.15 under November and may expand even more when the American harvest hits its stride. American beans are only 3 percent harvested so harvest pressure, except locally, is not yet an issue.

Chicago Board of Trade soybeans lost about 20 cents per bushel last week and may lose even more as the American harvest picks up. Elevator bids are around $12, which is about 30 cents lower than the week ending Sept. 20.

Delmar, like most processors, is plugged. The spot price on pre-contracted soybeans is $11.92 per bushel, but they are writing contracts for November delivery at $12.25.

Ultimately, well after harvest, soybean prices should strengthen, as the carryover next summer looks to be tight again. But first there’s 93 million metric tons of North American soybeans to be harvested in the next month or so.

Canary harvest under way

Canary harvest is under way, or done in many cases. Yields look above average and quality, as usual, is fine.

The 2013 crop was small with plantings well under last year. AgCanada projects the crop at 114,000 metric tons, which is a small crop. The average of the past three years was 144,000 metric tons. Add in the tiny carryover from last year and we have tight supplies — 129,000 metric tons and a projected carryout next July of only 10,000 metric tons. This is for the dominant canary supplier to the world.

You wouldn’t know that from the prices being paid. If anything, they’re lower than has been available through the last year. Part of this will be harvest pressure although you’d think there wouldn’t be a lot of canary being dumped. Country freight on board bids are around 23 to 24 cents per pound, but these prices are probably only being paid to farmers who have to sell, and there’s little volume.

Canola

The elevator system is filling up and the futures spreads are in the process of moving to full carry. Crop yields are a record in most regions and Vancouver fobbing capacity is booked until January.

The Canadian canola crop has potential to come in over 16.5 million metric tons, given current yield reports. Given the larger crop size, the carryout will finish near 2 million metric tons, which is in line with the five-year average.

The function of the canola market is to encourage demand through lower prices.

U.S. soybean fundamentals are relatively tight and the carryout will finish below the five-year average; however, the situation is quite different in South America where Argentina and Brazil carryouts will be above the five-year average. The U.S. soybean market needs to trade at a premium to South American markets so demand switches to Argentina and Brazil.

U.S. soybean values have been held up by stronger soymeal prices, which are expected to come under pressure as the U.S. harvest progresses.

South American soybean acreage is expected to increase this fall.

Producers banking on higher oilseed prices are counting on a crop problem in the Southern Hemisphere. Palm oil supplies are expected to increase in the next four months, which will result in softer world vegetable oil prices and spillover into canola.

Spring wheat prices grind lower

Spring wheat values continue to trend lower as the market digests the larger-than-expected Canadian and U.S. crops. Protein levels will be 1 percent below average so much of the Canadian crop will compete with U.S. hard red winter along with Russian and Ukraine mid-protein wheat.

There is a glut on the world market at this time, which has caused Canadian domestic prices to remain under pressure. Corn values are also trending lower, which has lowered the price floor for wheat and all feed grains.

We are not overly bullish on wheat prices, but will be patient to make further sales. The world wheat carryout has potential to finish near the five-year average but Canadian and U.S. spring wheat ending stocks will be above the five-year average for 2013 and 2014.

There is a seasonal tendency for wheat prices to stabilize or strengthen after the Canadian harvest. We are waiting to see how the upcoming Russian, Ukraine and U.S. winter wheat crops develop next spring.

There will be potential for the wheat market to incorporate a risk premium next spring if adverse conditions develop in one of these major growing regions.

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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