WINNIPEG, Manitoba -- Oats have had a nice run and are paying off for growers. Emerson Milling in Manitoba is paying $4.10 per bushel for April delivery while Grain Millers in Yorkton is at $3.95. Both prices are at or near all-time highs.
Oat supplies have been dropping. The prairie crop, one of the bigger oat crops in the world, went from 3.2 million metric tons in 2011 to 2.7 million last year. Supplies are dropping, as well.
That said, there are still quite a few oats in the country. AgCanada says carryout stocks will be 400,000 metric tons as of July 31. World oat production in 2012 dropped by 1.7 million metric tons to 21.3 million metric tons.
Production this year will be interesting. It's already looking like a late spring, which usually means more oats plantings. AgCanada suggests plantings may drop. Trade surveys suggest higher plantings. FarmLink Marketing suggested higher plantings at Grainworld.
There's a squeeze going on with nearby Chicago oats futures. March is $4.25. May is $3.94. The nearby futures strength is academic. It's probably some fund without access to commercial supplies caught short.
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No commercial buyer is basing price off March futures and open interest is only 23 contracts.
You may be thinking that oats prices have to continue to climb, but that is not necessarily the case. It looks like the U.S. is going to produce a massive corn crop this summer. The U.S. Department of Agriculture predicts corn will fall from the 2012 average price of $7.20 to $4.80 per bushel this fall. A decline of that magnitude may well start even before seeding, if conditions look OK, and lower corn prices could drag all crops down.
Lentils
The best thing you can say about the lentil market is that the low-grade 2010 product that has been hanging over the market has finally been cleaned up in feed rations. Supplies are more or less back to normal. In the current market, that still means ample supplies, since the 2012 crop was almost 1.5 million metric tons. There is no shortage of lentils.
With the weak prices that have been available Wild Oats has been a reluctant seller. But time is marching on. It's March, but most important, processors are starting to report that color in greens is fading. New deliveries of lentils bought as a No. 1 in the fall are grading No. 2. That's not going to get better.
Canola: new crop
There has been a fair amount of talk about canola acres dropping by 3 to 7 percent. But if canola acres drop by 5 percent and the five-year average yield of 32 bushels per acre materializes, Canadian canola production will be a record 14.7 million metric tons, compared with 13.3 million in 2012 and 14.6 million in 2011. New crop canola prices have been pulled higher because of the tight fundamental structure for 2012 and 2013. The market has been rationing demand and the domestic crush pace is slowing, while exports are sharply lagging last year. Earlier, we were anticipating a 2012 and 2013 carryout of less than 900,000 metric tons, but it looks like this could increase to 1.2 million metric tons, given the slower demand.
The new crop fundamental structure is not getting more bullish, but becoming bearish from current levels.
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Canola is heavily influenced by soybeans. The South American harvest is progressing and we forecast record soybean acres in the U.S. this spring. We expect downward pressure for new crop beans and canola moving into the fall period. The drought in the U.S. is over, as the weather pattern has changed.
Barley and feed wheat
Barley prices in southern Alberta continue to fluctuate in the range of $280 to $285 delivered in Lethbridge, while feed wheat trades around $295. Given the tighter supplies of barley and feed wheat, the market is functioning to encourage the use of alternate feedgrains, which includes milling wheat and imported dried distillers' grain with solutions (DDGS). We are seeing more widespread use of low protein milling wheat and imported DDGS in the feedlot rations.
Cattle on feed numbers in Alberta and Saskatch-
ewan have been running 7 percent below year ago through winter resulting in lower domestic feedgrain demand. Feedlot inventories tend to peak in April and then decline into the summer. This is a period of seasonal strong demand. Export values have come under pressure with the latest trade at $320 (U.S.) cost and freight to Tunisia. The Canadian domestic market is trading at a sharp premium to world values, limiting export movement. Later in March, USDA will release its seeding intentions. The industry is anticipating record corn acres. This will cause the North American wheat and corn markets to come under pressure. The ethanol grind has increased, resulting in more DDGS trading into southern Alberta. The South American corn harvest will begin later in March resulting in weaker world feedgrain values.
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 canadagrain.com.
