WINNIPEG, Manitoba -- If you're cleaning out your lentil bins, you may be having trouble finding a buyer. And you probably won't be too happy about the price, either. Several Saskatchewan processors have no bid on Estons and reds and are maybe 18...
WINNIPEG, Manitoba -- If you're cleaning out your lentil bins, you may be having trouble finding a buyer. And you probably won't be too happy about the price, either. Several Saskatchewan processors have no bid on Estons and reds and are maybe 18½ cents on a No. 2 Laird. Three weeks ago, No. 2 Lairds were trading at 24 cents per pound.
Much of this weakness is seasonal. Lentil prices traditionally peak in June and drop rapidly from Canada Day -- July 1, on. By this time, the new crop is developing and end-users, especially of greens, start waiting for new crop.
A further complication this year is the slow pace of Indian imports.
India is coming off a streak of good crops and 2013 is another. The Indian government is talking about imposing pulse import tariffs to protect local prices. This is an on-again, off-again process with a new announcement every second day. Indian pulse production is moving higher and it has shown with its wheat program that it can become a serious producer.
India has a further import problem. The rupee dropped about 25 percent from 2008 and stabilized early in 2013, but has since dropped a further 10 percent.
This has the double effect of making it more expensive for the country to import and also provides support for any exporting it may do.
The short story is that India -- Canada's major lentil importer -- is in go-slow mode.
There are still quite a few lentils around. AgCanada places the carryout at the end of July at 300,000 metric tons.
Canary prices flat
Old crop canary prices have been flat-lining since Christmas. They're trading around 27 to 27½ cents per pound. New crop prices have been strengthening since March and continue to do so. New crop has risen to 26 to 27 cents.
The big news in canary is the 45 percent decline in Saskatchewan seedings this year. Most of the improvement in new crop prices has been since that Statistics Canada seeding report.
Demand for canary appears to be falling. Some traders think the drop in prairie plantings is the only thing keeping canary as strong as it is.
Canadian barley production has potential to reach 9 million metric tons, up from the 2012 crop of 8.1 million metric tons. Despite the marginal year-over-year decline in seeded area, we project average yields of 60 bushels per acre, compared with the 2012 average of only 54. During the first half of the 2013 to '14 crop year, the feed barley market will function to encourage demand through lower prices.
Cattle on feed numbers in Alberta and Saskatchewan move through a seasonal low from August to
October. Feeder cattle exports to the U.S. are running 61 percent above last year so feedlot inventories could be 14 percent below the five-year average on Sept. 1. Domestic demand will be down sharply during harvest. Export prices in Vancouver will have to compete with the Black Sea, where Russian and Ukraine feed barley is trading at $245 freight on board. Current bids in the elevator system are based on domestic feed markets. Once this demand is fulfilled, however, the market will drop to compete on the world market.
Similar to the feed market, domestic malting companies have been aggressively contracting new crop supplies, but farmer selling has been extremely light. Given the recent weakness in new crop feed barley and world malt values, new crop domestic malt bids have dropped $40 per metric ton since spring. Sixty percent of barley grown on the prairies is malt variety, so we do not find domestic malting companies anticipating surplus supplies during the fall period. Crop conditions have been excellent so far and quality risks have deteriorated so that the concern over supply tightness has been alleviated.
New crop canola under pressure
New crop canola prices have come under pressure, as the market adjusts to the upcoming crop potential. Despite the year-over-year decline in seeded area, the crop has potential to finish near 14 million metric tons, up from the 2013 crop of 13.3 million metric tons. In addition to a larger Canadian crop, export values have declined because of favorable rapeseed crops in the Black Sea, which are now more competitive into Middle Eastern destinations. This has been a larger market for Canadian canola, but exports to this region will now be limited.
Editor's Note: Duvenuad publishes the Wild Oats Grain Market Advisory. For a free copy, call 800-567-5671.