WINNIPEG, Manitoba -- The first oats from the southern prairies are coming off OK. Weights are adequate to good -- most is coming in between 240 and 260 grams per half liter (millers want a minimum of 240 grams) and yields are running between 100 and 130 bushels per acre. Quality seems fine.
The recent hot, dry weather has taken the edge off yields and might also indicate light test weights and higher-than-normal thins. Early samples suggest that won't be a big problem. Nights have generally been cooler and dews have been heavy and that might be making the difference.
Get ready for another frustrating oat marketing year. Oats are still being held hostage by logistical constraints. In fact, the discrepancy in prices between areas, while better than a year ago, is still near historical. Elevators in northeast Saskatchewan -- the heart of the oats supply -- average around $2.30 per bushel, but try to find a bid. That's mostly a nominal price, since trade is thin. There's little reason to expect improvement any time soon. Elevators are still smarting from last winter's slow movement. No manager wants to plug their facility with oats.
Saskatchewan freight on board bids are better at $2.60 per bushel These oats are going by rail to Ontario, and the U.S. Manitoba elevators are mostly $3 to $3.10 per bushel, although buyers take targets at $3.25 when they want a bit of action. Emerson Milling in Maitoba is at $3.50 per bushel with delivery January or February. You might be able to deliver the odd load on a spot basis more quickly. Grain Millers in Yorkton, Saskatchewan, remains no bid. They're covered through February and probably won't start bidding until winter. North Dakota elevators are averaging $2.56 per bushel, $2.75 (Canadian). Ontario oats are $4.94 per bushel.
Chicago Board of Trade oats futures continue to have their strength in the nearbys. Spot September is $3.60 per bushel, and July 15 is $3.20. That market wants the oats now.
ADVERTISEMENT
Perhaps the assumption is that by next summer Canadian oats will be moving more easily.
There's no shortage of oats. We came into August holding 1.325 million metric tons of oats, almost triple the level from a year ago. Most Saskatchewan oats never did get moved. Plantings were down this spring, but not by a huge amount. Total Canadian production, Statistics Canada says, will be about 2.3 million metric tons, down sharply from 3.9 million last year. The big carryin, however, means supplies are only somewhat lower.
Demand is flat. Exports might rise marginally. Domestic food use should grow marginally. Feed use might decline as oats prices are holding better than corn or barley.
One potential bright spot is the fact that American oat facilities remain mostly empty. End users might have sourced enough oats this winter to keep their operations working, but none has any reserve. That potential market will remain theoretical until such time as rail transportation gets back to normal.
Canola
Statistics Canada estimated average Canadian canola yield at 32 bushels per acre, resulting in production of 13.9 million metric tons. This compares with the 2013 yield of 40 bushels per acre and production of 18 million metric tons. The fundamental structure for the 2014 to '15 crop year will be significantly tighter moving forward. Canola might move in line with the bearish bean complex in the short term, but in the latter half of 2014 to '15, the market needs to ration demand and encourage acreage for 2015. The 2014 to '15 carryout is projected to finish under the 10-year average at 1.4 million metric tons, down from 3.4 million in 2013 to '14.
Outside influences will continue to weigh on canola in the next month. Farmer selling will increase during harvest, while fresh buying interest will be on the sidelines, waiting for lower levels. Palm oil continues to trend lower with weaker soyoil prices lending the softer tone. The soy complex appears to have further downside moving closer to the record U.S. soybean harvest. The oilseed complex is functioning to encourage demand. Canola has taken on the broader fundamental structure in the short term and is only expected to deviate from the soybean market later in winter.
Barley
ADVERTISEMENT
Statistics Canada barley production at 7.2 million metric tons is down from 10.2 million in 2013. The longer term outlook for barley is to ration demand away from export channels as the domestic market functions to secure supplies. Canadian barley prices will need to trade at premium levels to the world market and we project larger U.S. corn imports into Southern Alberta.
Lethbridge, Alberta, barley has been trading $175 to $177 per metric ton delivered. Weakness in corn continues to spill over into the barley market and burdensome wheat supplies have also pressured domestic prices. It will take some time for these outside influences to subside and the barley market to function on the domestic supply and demand equation.
Durum
Statistics Canada durum production at 5 million metric tons is down from 6.5 million in 2013. This lower production was a surprise to the trade, as many analysts were looking for a number near 5.5 million. We continue to project an export program of 4.9 million metric tons, up from a 10-year average of 3.6 million. The world needs the Canadian durum and export values have remained firm, with ongoing buying interest from North Africa and Europe.
The forecast is uncertain, with the first half of September calling for above-normal rainfall in Southwest Saskatchewan. This will hinder farmer selling and has potential to strengthen elevator bids.
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.
