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Published October 14, 2013, 11:09 AM

Pea supplies are larger than normal

The big movement of off-combine pea sales has come and gone and the trade is starting to have to pull peas out of storage.

By: John Duvenaud, Agweek

WINNIPEG, Manitoba — The big movement of off-combine pea sales has come and gone and the trade is starting to have to pull peas out of storage. Prices are creeping higher.

Supplies had gotten to be on the tight side before harvest. The carryout was down to 175,000 metric tons, which, for a 3-million-plus-metric-ton crop, is pretty small. Any supply concerns were alleviated with the great 2013 crop. StatisticsCanada has it at almost 3.8 million metric tons. The average of the previous four years was just more than 3 million, so pea supplies are much larger than normal, even with the low carry.

Greens continue to be interesting. They pretty much ran out last summer and what was coming to town was fetching $17 plus per bushel. Prices peaked in June and then trade, more or less, petered out. Prices plunged as the new crop was looking good and buyers were in sticker shock. The bottom in prices was in early September as new crop poured into town.

With the Western Canadian crop outstanding, on-farm storage was an issue. It’s hard to think many green peas were dumped, but nevertheless, prices fell as low as $9 to $9.50 per bushel during the harvest.

Now harvest pressure on peas is over and prices are recovering. Demand from export buyers is steady. Current purchases will mostly be for sales made some time ago.

Green prices should gradually improve through fall until the Argentinean pea harvest comes on in December. One would guess the $17 per bushel being paid in Canada brought additional green seedings in Argentina. Australia starts its harvest in November and it too will have larger supplies.

Expect green prices to move up, maybe to $11, but they’ll have trouble going much higher than that.

Yellows are much quieter.

A big yellow customer — India — has well-known problems with its currency becoming dramatically weaker. This is a big problem for importers and they are stepping back from making commitments. Plus Indian growing season moisture has been good. The karif (summer) crop will be a record.

Just to make this market even softer, the Indian government has raised the minimum support price for all pulses by 30 percent in the past two years.

The above-normal rains all summer have India in good shape for its rabi (winter) crop, which is the larger of the two. Don’t expect a lot of support from India as a pea buyer this winter.

China, on the other hand, should continue as a strong pea buyer. It’ll likely take another 700,000 million metric tons this year, mostly yellows.

Canola

Canola prices remain under pressure as the market digests the larger crop. StatsCan has production at 16 million metric tons, but many traders expect an upward revision to 17 million. We continue to project a carryout near 2 million metric tons, which is just above the 10-year average; therefore, prices also have potential to drop near the 10-year average.

Commercial stocks in the elevator system have increased; exporters and domestic crushers have their 60-day requirements covered, which has also added pressure to the basis levels across Western Canada.

Fobbing capacity on the West Coast is booked up until February and rail logistics are also falling behind. We don’t see the environment changing for some time.

The U.S. Department of Agriculture stocks report was bearish for soybeans. Early yield reports are coming in better than expected in the U.S. Midwest. Soymeal prices have held up the bean market but soybean crushers closed earlier in summer, because of tight supplies, are now coming on stream. Recent rains have delayed the soybean harvest but the oilseed complex will have to digest the soybean crop in the next month, limiting any upside in the canola or soybean values. U.S. soybean fundamentals are not as tight as earlier anticipated and traders are projecting a record soybean crop in South America to be harvested in March and April.

Durum

Durum remains under pressure. StatsCan estimated the crop at 5.6 million metric tons, up 1 million over 2012. We continue to see some protein premiums being paid in the country elevator system but the overall market remains under pressure as a result of the larger crop size. USDA estimated the American durum crop at 1.6 million metric tons, down from 2.3 million last year; however, the larger Canadian crop will easily satisfy the U.S. demand. French durum production was 2.3 million metric tons, up from 2 million in 2012.

Wheat

Wheat prices across Western Canada were slightly higher last week, given the recent rally in the futures; however, basis levels remain under pressure as the Canadian elevator system is virtually plugged. StatsCan estimated the spring wheat crop at 23.8 million metric tons, a record. Lower-quality wheat will move into feed channels but most feedlots have their requirements covered until December.

The bright area in the wheat complex is the tight U.S. hard red winter wheat fundamentals, which has supported mid-protein wheat values. Western Canada has plenty of this quality this year. Brazil and central America have been significant buyers and this demand will continue until January.

Argentina has limited their export volumes and we need to watch this region in the next couple months. If export controls are eased from Argentina, our Canadian wheat market will come under significant pressure.

Editor's note: Duvenaud is the publisher of the Wild Oats Grain Market Advisory. For a sample issue, either call 1-800-567-5671, e-mail admin@canadagrain.com or visit canadagrain.com.

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