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Published February 10, 2014, 10:05 AM

Oats a crop to release

Oats are just another crop to get rid of now, along with every other grain. Now millers are dropping their price for oat products to their customers as the end users see the drop in farmgate levels and are starting to re-open standing contracts.

By: John Duvenaud, Agweek

WINNIPEG, Manitoba — Oats are just another crop to get rid of now, along with every other grain. Now millers are dropping their price for oat products to their customers as the end users see the drop in farmgate levels and are starting to re-open standing contracts.

Emerson Milling in Emerson, Manitoba, is still taking oats, as long as the amounts are not overwhelming and paying $3 per bushel. Elevators in southern Manitoba also have a decent oat bid — $2.80 per bushel. Saskatchewan elevators are around $2.23. They’re buying off and on.

The Statistics Canada report really didn’t affect oats to any degree. The real killer news was the December production report that was head and shoulders above even the highest trade estimate.

CBT oats futures are having a great run. Chicago oats are strong compared to northeast Saskatchewan.

Minneapolis millers report that they have all the oats they could possibly use already bought up.

Elevator bids in Manitoba at $2.80 are remarkable in that they are still open. The average target price is slipping but would still be close to $3.

Canadian Oats in Edmonton is bidding $2 per bushel with the first delivery dates in April. This is down from $2.35. They are mostly still taking contracted oats.

Grain Millers had a new crop bid for a short time in December and rapidly filled up. They started at $2.90 and gradually lowered it to $2.50 before cutting it off completely. Emerson Milling is also no bid. They had opened new crop bids at $3 but have long since filled up. Canadian Oats is at $2 per bushel on new crop.

Manitoba elevators are still contracting new crop oats at $2.40. Saskatchewan elevators are $1.66 to $1.70. One elevator at Canora is quoting $1.40.

Alberta elevators are mostly bidding $1.45 to $1.50.

A bigger concern will be storage. It’s already apparent that a large amount of grain will be orphaned on prairie farms through to new crop.

Canola

Canola values in Western Canada traded in a sideways pattern in the past couple weeks, as the commercial system might have reached the peak of the logistical backlog. While below normal temperatures are forecasted for February, it appears that weather conditions will slowly improve.

Companies have been hesitant to make export sales for the summer months, given the nearby uncertainty in rail logistics, but the futures market is anticipating larger demand from July through October.

On the flip side, it appears the meal market is starting to turn over after trading near contract highs. It is important to note that the December soymeal futures are trading at an $82 discount to the March contract. The market anticipates larger supplies in new crop positions. Meal values have been a significant factor supporting old crop prices, but with weaker meal prices on the horizon, don’t expect a rally in old or new crop canola prices. World vegetable oil prices remain under pressure, and with the main South American harvest only 30 days away, we don’t expect canola crush margins to improve.

The canola market tends to bottom by trading in a long-term sideways range, which can last two to five months. This recent price action may be the start of bottoming type behavior because all the negative price influences have been factored into the market. Now, we are not saying the market is turning, and we don’t want to renew any bullish ideas. But the downside in canola may be limited in the short term until new crop acreage estimates start to come forward.

Barley

Cash barley traded $152 per metric ton to $156 per metric ton delivered Lethbridge, Alberta, two weeks ago. This is the first time through winter the market has actually stayed firm. Cattle on feed numbers are running 9 percent higher than last year in Alberta and Saskatchewan. But we are seeing more wheat moving into feedlot rations with prices similar to barley. Increased wheat usage has weighed on feed barley values. Limited movement of low-quality milling wheat continues to cause farmers to sell into domestic feed channels.

Total barley exports for the week ending Jan. 19 were 0.5 million metric tons compared with 1.5 million last year. The slower export pace has caused us to increase our carryout projection for 2013 to ’14. We now project ending stocks to finish at 3 million metric tons compared with 1 million in 2012 to ’13 and the 10-year average of 2.1 million metric tons. While the market appears to have stabilized for the time being, burdensome stocks will keep the market under pressure. There might be potential for a small rally prior to seeding, at which time we will advise further sales recommendations.

For new crop, we are expecting a year-over-year decrease in Canadian barley and U.S. corn acres. We will hold back on new crop sales recommendations until upcoming acreage is more certain. The market is ill-defined for new crop at this time so we don’t see any opportunities.

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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