Duvenaud: Harvest approaches finish line
WINNIPEG, Manitoba -- Western Canada's harvest has probably passed the 95 percent level after a few good harvest days in Alberta. In the U.S., corn is 59 percent harvested, which is on pace with the average. Soybeans are 77 percent harvested, 5 p...
WINNIPEG, Manitoba - Western Canada’s harvest has probably passed the 95 percent level after a few good harvest days in Alberta.
In the U.S., corn is 59 percent harvested, which is on pace with the average. Soybeans are 77 percent harvested, 5 percent ahead of normal.
Canola prices continue to trade in a narrow range as the market digests harvest selling pressure. But we are starting to see farmer deliveries ease. They have dropped in the past couple weeks.
At the same time, the domestic crush pace is exceeding year-ago levels, while crop year-to-date exports are similar to last year.
Commercial stocks are beginning to tighten, which is supportive for the market.
The November to January futures spread is trading at a $6 carry, but the January to March futures spread is closer to $4. This suggests available supplies will be somewhat tighter during winter, as commercial stocks decline.
The soybean complex is also moving through a transitional phase.
U.S. stocks will rise to burdensome levels, and the South American crop is expected to be marginally above last year. U.S. export sales to China are running below year-ago levels because of the advanced market share from Brazil.
The soybean complex is heavy moving forward, which will temper the upside potential on canola.
Wild Oats is looking for a seasonal rally late in fall or early winter.
Chinese demand is expected to step forward more aggressively for canola, and the market has potential to strengthen.
Central Brazil has experienced above-normal temperatures and dryer conditions, so the soybean market might incorporate a risk premium if the market anticipates ongoing dry conditions.
Wheat market under pressure
Milling wheat prices in Western Canada have come under pressure because of the weaker futures and strengthening Canadian dollar.
We continue to see Russian and Ukraine exports dominate the Middle East and North Africa, limiting marketing opportunities for North American origin wheat.
The large exportable surplus from the Black Sea region, Europe and the U.S. is keeping pressure on the market. The wheat market is contending with record-large supplies, which will limit rallies.
Also, the weather premium resulting from adverse dryness in Russia, Ukraine, Australia and, to some extent, the U.S., has been alleviated for now.
Northern Hemisphere crops will be going into dormancy in the next month, and it becomes a waiting game while the market’s focus turns to demand.
One factor that could influence the market is that corn supplies are dropping in the U.S., Ukraine, Europe and South America. The corn market has potential to strengthen later in the crop year, which will be supportive for the wheat complex.
Finally, we have to monitor the upcoming wheat crops when they come out of dormancy.