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Duvenaud: Yellow pea market defies gravity

WINNPIEG, Manitoba — The yellow pea market continues to defy gravity. You can probably find somewhere close to $9 per bushel delivered for your yellows, which by any measure is a great price. On top of that, elevators are doing all the business, so all you probably have to do is deliver locally.

Probably about 75 percent of the yellow peas in western Canada have already been delivered, and this makes total sense. Right now, buyers want yellow peas. Charts suggest yellow peas are no longer in a bull market. In early October, yellows attempted a big upside breakout, but failed. Yellows have broken their uptrend line.

Green peas, on the other hand, for much of the early fall, were the forgotten crop. Green peas are eaten as peas and generally are not used as a substitute for any other crops, unlike yellows. Even veteran traders are somewhat surprised that greens are not replacing yellows

in any Asian markets.

Regular, long-time green customers were being served by independent processors, but otherwise, markets were hard to find. The spread between greens and yellows was huge in August, but is gradually narrowing. You should be able to find $8 per bushel freight-on-board for greens, which is pretty good, except when compared with yellows.

The charts for green peas show the downtrend line has been broken. Expect a slow improvement in prices.

The trade estimates only 20 percent of the green peas in western Canada have been sold. This is a slow pace and suggests greens are in strong hands.

Lentils on fire

Lentils continue to be on fire for many of the same reasons yellow peas are increasing. Recently, a lot of 100,000 bushels of No. 1 and X2 Lairds sold at 55 cents per pound. No. 2s traded at 50 cents. Reds traded at 42 cents.

The average price of red lentils in western Canada in the past 10 years, according to the Canadagrain.com database, has been 23.7 cents per pound.

Canola

Canola prices have traded in a narrow range since early August. When a market trades in a range for a long period of time, and then breaks out of the range, there is usually a significant move.

The January canola futures have major resistance at $488 area, but weekly canola deliveries are declining each week. For the week ending Oct. 18, farmer deliveries were 355,000 metric tons, which is down from the highs of nearly 650,000 in the middle of harvest.

We see the selling pressure at the top end of the range starting to ease; therefore, the bias is that we see a breakout to the upside.

The U.S. soybean harvest is in the final stages, and we continue to hear of plugged elevators in the U.S. It will take some time for the soybean complex to digest these larger supplies. U.S. soybean exports are trailing last year, and the larger crop size is limiting the upside. The South American crop is projected to be slightly higher than last year, but timely rains are needed in central Brazil as this region moves into the planting period. We are moving into a weather market in regards to South American conditions, and we often see the market incorporate a risk premium because of the uncertainty in production.

South American farmers often sell a larger portion of the crop before harvest, but if adverse conditions materialize, this selling will ease. Therefore, the soybean market outlook is somewhat heavier, but this market will not fall apart until the upcoming crop is more certain. This might allow canola some breathing room. We expect the canola market to divorce from the bean complex.

Milling wheat

The Northern Hemisphere wheat harvests have wrapped and the market is now focused on demand. Black Sea origin wheat has been dominating the world market. U.S. wheat exports are trailing year-ago levels and with the larger carryout projections for U.S. hard red winter wheat, the futures market has been functioning to encourage demand.

Despite the burdensome fundamental situation, the market has some issues. We anticipate USDA will lower Australian and Argentinean wheat production. Secondly, Ukraine, Russian, and U.S. winter wheat seedings have potential to reflect a year-over-year decline and this should provide the market with some upside potential.

Next spring, we will likely see smaller wheat acreage in Western Canada as farmers plant more canola and less wheat. Finally, we are looking for strength in the coarse grain complex because Europe, Ukraine, Brazil, Argentina and, most importantly, the U.S., are expected to have smaller corn harvests this fall. This bodes well for the wheat complex given the feed component.

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