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Published March 24, 2014, 09:36 AM

Mustard prices decent

WINNIPEG, Manitoba — Mustard markets have probably worked better than any other through the winter. Prices have stayed at decent levels, maybe not as high as you’d like, but far closer to year ago levels than wheat or canola.

By: John Duvenaud, Agweek

WINNIPEG, Manitoba — Mustard markets have probably worked better than any other through the winter. Prices have stayed at decent levels, maybe not as high as you’d like, but far closer to year ago levels than wheat or canola.

In July 2011, the western Canadian carryout of all mustards was 125,000 metric tons and those big on-farm stocks provided a continual flow of product to cap any rallies. The past few years saw some small crops and those extra stocks that were overhanging markets have mostly been cleaned up. That’s not to say there’s a shortage. There appears to be adequate supplies.

Movement is an issue with mustard, just as it is for every crop, but not nearly to the same degree as with mainline crops. Lots of yellow moves to the U.S. by truck, and that’s working fine. Exports by hopper car and container aren’t moving quite as well.

Spot prices for yellow are around 34 cents per pound. New crop is 30 to 33 cents, with 30 cents for off the combine delivery moving up to 33 cents for July. Brown is 34 cents spot. New crop is 28 to 30 cents. Oriental, which is about 10 percent of total prairie production, is 23 to 24 cents spot with new crop at 25 cents.

The big change in mustard marketing in the past year or two is the huge reduction in the amount of mustard that is contracted before it’s planted. It used to be that the large majority of mustard was pre-contracted. Pre-contracting still exists but mostly because lots of growers expect it. End users are moving away, perhaps because there hasn’t been any critical shortage for several years.

New crop plantings will likely be considerably larger than in 2013. Seed sales suggest a 25 to 45 percent increase in plantings. Some processors think plantings might not be that high because pre-contracting has not been done. Regardless, yields are unlikely to match last year’s levels and the carry in will be smaller. Total supplies might be smaller. The possibility of larger acres is a reason to be getting your old crop cleaned up.

Vegetable oil values support canola

Canola futures continue to percolate higher because of stronger world vegetable oil prices. The dryness in Malaysia and Indonesia has resulted in lower-than-expected palm oil production and strengthened domestic canola crush margins. Although the crush pace continues to lag year-ago levels, we expect domestic demand to increase in the next month, now that logistic improvements will enhance movement of canola oil and canola meal.

Exports of canola are expected to improve moving forward, as talk in the industry suggests the worst of the rail backlog is over, and warmer temperatures along with the recent government legislation will improve the export pace in upcoming months.

Canola prices drifted lower earlier in winter, while soybean futures traded near contract highs. The soybean premium over canola will narrow in upcoming weeks.

Soybean export sales have slowed considerably and it appears that a number of cargoes of South American beans have been cancelled by China and diverted to the U.S. China has also cancelled a large amount of U.S. soybean sales, weighing on nearby values. But new-crop soybeans need to encourage acreage, which will temper the downside in the soybean complex.

Look for canola to stay firm through the next couple weeks. Improved logistics and stronger domestic crush margins will underpin the market.

New crop fundamentals are tighter ,and the market will be more sensitive to acreage estimates and upcoming growing conditions.

Strength in corn spills into barley

Feedlots in the Lethbridge, Alberta, area were buying feed barley in the range of $178 to $180 per metric ton delivered last week. Cattle on feed inventories in Alberta and Saskatchewan continue to run 10 to 12 percent above year-ago levels, enhancing domestic demand while producer selling has slowed in comparison to earlier in the crop year. Export movement continues to sharply lag last year as companies struggle to fill canola and wheat commitments off the West Coast. But there is potential for the export pace to improve late in the crop year now that the rail logistic situation appears to be improving.

While we continue to project a burdensome carryout for the 2013 to ’14 crop year, the focus is turning to new crop fundamentals. We are forecasting a 10 percent decrease in barley acres this spring, which will cause the Canadian barley carryout to drop sharply below the 10 year average for 2014 to ’15.

Secondly, the corn market is functioning to encourage acreage and the 2013 U.S. corn crop might be smaller than earlier U.S. Department of Agriculture estimates.

We want to draw attention to the Chicago Board of Trade July December corn futures spread, which is now trading at an inverse. The market is telling producers not to store corn into the new crop year, whereas if the carryout was sufficient, the December corn futures would be trading at a premium to the July contract. Basis levels for corn have weakened in the Midwest in the past week, but the futures market is telling a different story.

It appears that the commercial companies are neutral to bullish corn, especially in the deferred positions.

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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