Canary markets depressed

WINNIPEG, Manitoba -- Canary markets remain depressed. Exports to most destinations are below those of a year ago. The reason is the general economic malaise throughout most of the world. There isn't as much discretionary money around. One of the items being cut back is birdfood.

Few traders are holding more inventory than is required for immediate business.

Canary remains cheap compared with other birdseeds. Commercial birdfood mixes generally are still half canary. Canary seed, by the way, is the most healthful and complete avian ration available.

Canary exports to Mexico continue, despite their vigorous weed restrictions. The cost of the extra cleaning is being absorbed by exporters. Mexican importers don't pay a penny more for the super cleaned canary and why should they?

Canary fundamentals remain positive. AgCanada projects a 10,000-metric-ton carryover, but the market has known about these tight stocks for months.

Stocks are presumably higher than the official estimate, but much is not available at current prices.

Prices have been strengthening, but only within a range. They're at or near their highs for the year. freight-on-board farm bids are 26.5 to 27 cents per pound, up 4 to 5 cents from their August lows.

Lentil market gaining

Lentils have been the lonely dog in a world of high- priced crops.

While prices for most crops soared, lentils have been trending lower -- for two years in the case of greens and four years for reds. In the past few weeks, lentil prices have stopped dropping, actually moving up a hair.

Green lentils have strength. South America has finally started buying some volume.

Processors, after operating at 70 percent capacity through most of the winter, are now booked solid through March.

Reds have the stronger charts. Prices hit bottom a year ago at 13 cents and have been stronger since. This month, they broke through the 20 cent barrier.

The big carryover also seems to be working its way lower. AgCanada still has it at 615,000 metric tons this July, down from 700,000 last year, but much of that was low grade and, in a world of $8 feed peas, it has been moving rapidly into feed channels. The carryout is not yet tight, but it's working in the right direction.

Lentils are not a crop you want to hold for a long time and it looks like there may be some better sales opportunities coming.

Canola demand eases

Canola futures have been volatile, as March trades in the range of $620 to $650. The crop year-to-date domestic crush pace for the week ending Feb. 13 was 3.8 million metric tons, compared with 3.6 million last year. While the domestic crush pace remains strong, exports have eased. Year-to-date exports are 4.3 million metric tons, compared with 5.2 million in 2011 and 2012. The market is functioning to ration demand, and we expect exports to slow further. It will be difficult for canola futures to move significantly higher.

Canola futures also have received spillover pressure from the bean complex. The forecast for Argentina's soybean region is more favorable for the critical pod development stage. We also have seen U.S. old crop soybean export sales to China switch to new crop, which suggests that demand may be easing for U.S. soybeans. The world vegetable oil complex is dealing with larger palm oil supplies, which has tempered the upside in canola oil values. Meal has been the significant driver in the soybean market, but this has less influence on canola.

Milling wheat

Wheat stocks on farm are slightly above last year and farmers have a fair amount to deliver. Elevators in Western Canada are running at 50 to 60 percent capacity. Industry comments suggest, however, that the elevator system will be plugged later in March. There is a herd mentality for farmers to move grain before road ban season and we want to jump ahead of that.

The U.S. hard red winter wheat region has been dry, but the area is shrinking. The northern hemisphere winter wheat harvests start in June. The U.S. farmer will be an aggressive seller at harvest to capture the higher prices. Export competition also will grow from the Black Sea region. It is hard to make an argument that the wheat market will move back up to the prices from last fall, so finish sales.

Durum

While the Canadian durum carryout will be rather tight, the U.S. durum situation is burdensome. U.S. exporters are very aggressive on the world market.

We don't see any risk that could drive durum prices higher; therefore, we don't want to be holding durum later in the crop year. The Mediterranean-area durum harvest starts in late May and buyers will be patient for new crop supplies.

Editor's Note: John Duvenaud is the publisher of the Wild Oats Grain Market Advisory. For a sample issue, either call 1-800-567-5671, email admin@canadagrain.com or visit www.canadagrain.com .