WINNIPEG, Manitoba -- Flax continues to have a good market. Legumex is paying $14.50 per bushel delivered in Winkler, Manitoba. Elevators are about $13.50. Compared with canola, flax is on the expensive side. Flax fundamentals are not especially tight. The carryover this July will be 130,000 metric tons, according to Ag Canada, up from 80,000 last July. Markets have been supported by the Kazakh flax crop, which wound up covered with snow last fall. That meant European users, once again a buyer of Canadian flax, had to source elsewhere.
Peas softer
Yellow peas have been trading at more than $9 per bushel much of the winter, touching $9.50 briefly. Recently, prices have eased off on little fundamental news. Now you're probably looking at $8 to $8.25 per bushel. There aren't a lot of peas out there anymore and farmers who have them don't seem to be pushing sales. It looks as if trade is just slowing down.
New-crop bids are about $7 to $7.75 per bushel, so processors aren't being aggressive. Probably planting will be higher and they're almost in a position to wait for new crop. There doesn't seem to be much danger.
Barring a weather event, there isn't much upside in old crop. But there are two potential weather events. In India, the rabi harvest is being plagued by excess rain. India is a major importer of peas. The rain won't cut production a lot, but there is mostly only open air storage and there will be some losses. The amount of damage to the Indian crop is still being determined. Regardless, the upside in old crop is limited. At best, we're probably only looking at $8.50.
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Old-crop yellows had such a great winter, not because of Indian buying, which is usually the case, but because of Chinese buying. That's a fundamental, and bullish, shift. China has figured out that Canadian peas are a cheap food ingredient. Old crop could still rally by summertime.
New crop bids at $7 to $7.75 per bushel are probably the lowest we'll see all year.
Canola prices remain firm
The market had a major sell-off earlier in March but has since retraced and is now trading near recent highs. This volatility reflects how vulnerable the market is at the higher levels.
There are a number of risks farmers should be aware of moving into spring. First, the Chinese canola harvest will begin in April, which could result in lower export demand. Overall Canadian exports continue to exceed last year's pace but fresh business has potential to slow down later in April.
Second, the canola market has divorced from the bean complex because of the tighter fundamental structure of canola versus U.S. soybeans. But the market has now reached high enough levels where demand will start to ease. Meal and vegetable oil values are starting to deteriorate, which will weigh on the crush margin structure moving forward. Canola prices in Western Canada have actually exceeded our expectations, so we want to be selling into this strength.
We are expecting a marginal increase in canola acres in Canada and soybean acres in the U.S. The canola market has potential to come under pressure during the harvest season, so this sale will allow farmers timely delivery off the combine for storage requirements and cash flow needs. The Canadian dollar is currently near six-year lows, and if we see a recovery in the crude oil market later in fall, the canola market could weaken as the Canadian dollar strengthens.
Barley and feed wheat
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Feed barley in Southern Alberta has been trading in the range of $200 to $205 per metric ton in the past couple weeks. Road bans and spring seeding are right around the corner and farmer selling will subside in April, providing an opportunity for our next sale. Cattle-on-feed inventories are also at seasonal highs, but will start to decline in May. The barley carryout for the 2014 to '15 crop year will be historically tight; therefore, we expect the market to gain an additional $10 to $15 per metric ton in the next month.
Feed wheat prices have also hovered at about $205 per metric ton in the Lethbridge, Alberta, area, while in central Saskatchewan, prices are near $157 per metric ton. Given the higher prices of domestic feed grains, farmers in the major feeding regions have also been selling lower-quality milling wheat into feed channels.
We are expecting better sales opportunities later in the crop year. First, the overall wheat complex usually experiences a seasonal rally in April as the Northern Hemisphere crops come out of dormancy. There are many regions that have experienced adverse conditions and the market will incorporate a risk premium because of the uncertainty and lower world wheat production. Second, it appears Western Canada will experience a normal spring weather pattern.
If it looks as if Canada will have an average-quality wheat crop, feed wheat prices will start to percolate higher in late spring and summer.
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.
