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Published August 04, 2014, 09:34 AM

Strength in canary bids

WINNIPEG, Manitoba — Canary has had a nice upswing. In April, it was trading at 19 cents per pound, that was the bottom, and has gradually been working high.

By: John Duvenaud, Agweek

WINNIPEG, Manitoba — Canary has had a nice upswing. In April, it was trading at 19 cents per pound, that was the bottom, and has gradually been working high.

There was a flurry of activity in the past week, with 22.75 cents available freight on board farm Saskatchewan now and 23.5 cents delivered.

On-farm stocks are plentiful, according to processors, although AgCanada has the carryover at 5,000 metric tons. Anecdotal evidence suggests there might be a further 75,000 metric tons of canary stored in back pastures.

There’s some uncertainty about the new crop. Acreage is up. The question is how much damage has been done by excess moisture. There has certainly been some loss, but what was lost in the wet areas might be made up by higher yields in prime west-central Saskatchewan.

Sales made now, at the end of the crop year, will probably be shipped by the processor as new crop. New-crop bids have been at 0.5-cent discount to old crop for some time. There is little reason, barring a very early frost, to expect much of a further rally in canary.

Peas steady

The writing has been on the wall for a couple of years, but greens, up until very recently, have still been bringing in prices well above yellows. After big 2012 and 2013 green crops, greens stand at $8 per bushel, which is a great price, but nowhere near where they have been.

Green plantings this year were 500,000 acres, up from 400,000 last year, which were much above 2012 plantings.

Prices were steady and going up as late as March, trading at more than $11 per bushel, but they have been weakening significantly since. With SaskAg reporting an 80 percent good-to-excellent rating on peas and a large crop in the ground, any green shortage will soon pass.

A drop from $11 to $8 is certainly significant. The scary thought is that, with yellows trading smoothly at $6 per bushel, greens could still slide.

The upside with peas is that the Indian monsoon is still weak, and China keeps buying them.

Peas, of course, have been the cheapest feed pulse in the world for months.

Canola overview

The canola market is digesting production estimates as we move toward harvest. Industry forecasts have the crop in the range of 14.5 million to 15.5 million metric tons and the fundamental structure is significantly tighter, compared with spring. Basis levels are narrowing across the prairies because of strong export and domestic demand for the fall period. Farmers have been reluctant sellers of new crop, and with the smaller production, deliveries from August to December will be down from earlier projections.

Canola futures have been under pressure because of weakness in the bean complex, but cash values are edging higher, reflecting Western Canadian conditions. The market is functioning to entice farmer selling.

We don’t expect any logistical concerns during the first half of the crop year, so the pipeline will be extremely liquid, given the lower supplies. Canola fundamentals are transitioning from a burdensome situation to a rather tight forecast by the end of the 2014 to ’15 crop year.

We expect canola prices to move in line with soybeans until after harvest because the market has a large carryout and harvest-selling to absorb. Next spring, the canola market will encourage acreage. This might not be difficult if prices remain near current levels and spring wheat is under $6 per bushel. In any case, we expect canola to divorce from the main oilseed market in the latter half of the crop year, given the tighter fundamental projection.

Feed barley overview

Barley prices in Southern Alberta are coming under pressure with new-crop supplies expected by the third week of August. While the barley fundamentals are snug for the 2014 to ’15 crop year, the market encourages demand through lower prices. A record-large U.S. corn crop and weak world barley prices have set a negative tone to the domestic barley market. Second, cattle-on-feed inventories drop to their seasonal lows in late August and September, which results in a very sluggish market during harvest.

Ukraine and Romanian feed barley is trading at $215 per metric ton freight on board the Black Sea port. This equates to a Saskatchewan elevator selling under $2 per bushel to compete into North Africa and the Middle East. Southern Alberta feedlot buying ideas are at $170 per metric ton for September and October and using commercial trucking rates, Saskatchewan elevator bids should equate to $2.50 per bushel.

Domestic values will dominate the feed barley market for the 2014 to ’15 campaign. Feedlot inventories generally peak in December and again in April, which will cause the market to increase. Next spring, the barley market will encourage acreage, which should also cause higher prices. The market for new crop is relatively undefined because of the production uncertainty and limited feedlot interest.

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 admin@canadagrain.com or visit canadagrain.com.

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