Canola reaching higher
WINNIPEG, Manitoba -- We have seen a sizeable rally in U.S. corn, which has spilled over into the wheat and barley markets. Analysts forecast a 3 to 5 percent decline in U.S. corn acreage in 2015, which will make the market sensitive to weather a...
WINNIPEG, Manitoba -- We have seen a sizeable rally in U.S. corn, which has spilled over into the wheat and barley markets. Analysts forecast a 3 to 5 percent decline in U.S. corn acreage in 2015, which will make the market sensitive to weather and yield development. If acreage is down 4 percent and adverse weather materializes, U.S. corn would have potential to strengthen by $1.50 to $2 per bushel. We would likely see wheat and barley prices jump by $30 per metric ton to $40 per metric ton if corn acres are down by 4 percent.
The factor to watch is Russian export policy and upcoming crop developments. There are no export offers for Russian wheat at the three major grain houses that export more than 80 percent of the wheat. They have stopped selling wheat until Russian domestic wheat prices stabilize. Minor efforts by the government have curbed exports, but there has been no major policy change. The Russian and Ukraine winter wheat crops went into dormancy under adverse conditions resulting in lower production estimates for the 2015 crop.
Cash barley continues to trade in the range of $197 per metric ton to $200 per metric ton delivered to Lethbridge, Manitoba, area feedlots. We continue to forecast a tight Canadian barley carryout, which should cause prices to rally later in February and March.
Wild Oats is currently 40 percent sold on feed barley and milling wheat. We expect increased volatility in the latter half of the 2014 to '15 crop year.
Elevator prices continue to reach up to the $10-per-bushel level, where farmers have been aggressive sellers. This price level has seen major resistance in the past couple months. When the market finally breaks higher, there is potential for another leg of $20 to $30 per metric ton. Canadian canola production finished at 15.5 million metric tons, down from 18 million metric tons in 2013. Domestic and export demand continue to exceed year-ago levels. Available supplies will continue to tighten as we move through the crop year. The canola market needs to encourage acreage next spring through higher prices, which will support new-crop prices.
Soybeans have been holding value despite the increase in U.S. production. Similar to canola, U.S. soybean demand continues to exceed last year. Expect USDA to decrease the carryout for soybeans. Vegetable oil prices have been relatively stable. The South American crop is developing under favorable conditions. The market is factoring in larger production. If adverse conditions develop, oilseeds will incorporate a risk premium.
Quality is not there with lentils, but processors are getting used to it, and end users have come to terms with what is available.
Green lentil markets are hot. A No. 1 Laird would trade at 40 cents per pound. No. 2's are at 30 to 35 cents per pound. There's a significant difference between No. 2 and X2. These are good prices, especially given the quality. Lentils are just an edible protein, and users will switch, given enough price incentive. High prices generally come about when an exporter is caught short on a commitment. If that were going to happen this year, it probably would have already happened.
Reds are also strong, trading close to 30 cents per pound. You might be able to find 35 cents for top quality, but that would be a stretch. It's unlikely that 40 cents is in store.
We almost ran out of mustard last year, prices were good and plantings went from 335,000 to 363,000 acres. Production increased from 155,000 metric tons to 198,000. There wasn't much of a carry-in, only 5,000 metric tons of all mustard, according to Ag Canada. Still, total supplies increased from 193,000 metric tons to 208,000. Most will get taken within the crop year. Mustards are moving well.
Most processors are still working with contracted mustard.
Yellow trades in a wide range -- 32 cents picks up a steady supply, but if a buyer is reaching it's easy to get to 33 to 35 cents per pound. Yellow is the big mustard, the one off-and-on growers normally reach for first. It's also the biggest market, and American buyers like Canadian product. With the Canadian dollar slumping from 93 cents in July to the current 86 cents, American buyers can afford an extra few cents.
Quality is not normally a big issue with mustard, but this year it is. There's not a lot of No. 1 mustard out there, but lots of low grade. This might be the year to get an official grade on your mustard, if it's good quality.
New crop contracts are starting to show up with yellow generally at 32 cents for off-the-combine, increasing to 34 cents for deferred.
Buyers are generally picking up any overages on their contracts.
Brown mustard is not quite as hot as yellow. It generally trades around 27 to 29 cents. Brown has traditionally been higher than Oriental, but now they are about the same. Brown should have some room to move.
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 email@example.com or visit canadagrain.com.