Dry concerns showing upWINNIPEG, Manitoba — Alberta is starting to dry up. Crops got a good start, but conditions are slipping and the outlook is for an about average crop now.
By: John Duvenaud, Agweek
WINNIPEG, Manitoba — Alberta is starting to dry up. Crops got a good start, but conditions are slipping and the outlook is for an about average crop now.
Basis levels narrowing for canola
Canola basis levels are narrowing across the prairies as traders trim their yield expectations for the Canadian crop. Domestic crushers are starting to bid more aggressively for canola in eastern Saskatchewan and Manitoba to secure supplies for the fall period. At the same time, we are forecasting a record-large export program for the first half of the 2014 to ’15 crop year, which will drain supplies from Alberta. We are now forecasting a Canadian canola crop near 15 million metric tons, which is down 3 million metric tons from the 2013 production of 18 million metric tons. The fundamental structure is tightening because of lower production expectations and record-strong demand for the upcoming crop year.
Basis levels are strengthening as the canola futures grind lower in line with the overall oilseed complex. The U.S. soybean crop continues to develop under favorable conditions, spilling over into canola.
World vegetable oil prices are functioning to encourage demand as the market factors in the burdensome soybean and palm oil supplies.
Looking forward, the canola market will need to encourage acreage in the spring of 2015, which should result in favorable pricing opportunities.
Rail movement for 2014 to ’15
Canadian wheat production will be down more than 10 million metric tons from last year, canola production will be down 3 million metric tons and barley production will be down 2.5 million metric tons. During 2013 and 2014, the Canadian system was overwhelmed with supplies, but this will change in the upcoming crop year. The large carryouts of wheat and canola will keep the system running near capacity into harvest, but barring another winter of record-low temp- eratures and above-normal snowfall, we do not expect significant delays in rail movement. The railway legislation ends on Aug. 3, and at this time, it is not confirmed if the government will renew it.
American grain movement is lagging. Barge movement has been hampered all spring and summer by high water levels. Because barge movement is slow, American rail rates have reached record levels and this is raising prices at Pacific Northwest grain terminals.
The U.S. is already having problems moving grain and, with a record crop ripening, is on track to experience the grain movement problems seen in Western Canada last winter.
Milling wheat update
Milling wheat prices continue to trend lower because of favorable conditions in North Dakota and most of the Canadian prairies. World wheat values are adjusting for the Northern Hemisphere wheat harvests. Supplies on the world market are burdensome. In Western Canada, basis levels have held value for higher protein wheat, while low-protein basis remains relatively wide. Low-protein milling wheat has to compete with U.S. hard red winter and Russian milling wheat into Central America and the Middle East. There is strong competition.
Editor's note: Duvenaud is the publisher of the Wild Oats Grain Market Advisory. For a sample issue, call 1-800-567-5671 in Western Canada and North Dakota, 204-942-1459 for all others, or e-mail firstname.lastname@example.org or visit canadagrain.com.