WINNIPEG, Manitoba -- Harvest is under way, but not general. Early yields are a bit below average, maybe 15 to 16 bushels per acre for yellow and 20 to 25 bushels for brown.
Processors are not aggressive buyers. Ukraine and Russia are harvesting their mustard and selling. Ukrainian farmers in particular are converting their product into cash while they can. European users, of course, are taking this product, which is closer and cheaper, and not even thinking about importing from Canada.
There is an immediate window for yellow sales. Most yellow moves to the U.S. under 18-month contracts. Usually these buyers move at a stately pace, not holding inventory beyond what is required for just-in-time management. Some end users, however, have decided to physically hold a bit more mustard than usual, just in case. They're calling for delivery now.
That has some Canadian suppliers in a tight situation. Stocks are not ample. The carry in is only 15,000 metric tons of all mustards and little new crop has been delivered. Farmers might be able to find 40 cents if farmers have yellow ready to deliver. The nominal price for yellow is 36 cents per pound.
Processors are taking contracted mustard and, except for this temporary yellow situation, generally waiting for European buyers to return to the market. It might be difficult to find a brown bid. The nominal price is 30 to 33 cents. Oriental is 29 to 31 cents.
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Lentil quality hurting
With 75 percent of the lentil crop harvested, there isn't much high quality.
Most reds are X3. Those harvested before all the rains are a poor No. 2.
Greens are even worse. There are virtually no No. 1 Lairds. Most are at the lower end of a No. 2. Many have sprouted. Many greens will grade feed, or sample.
The low quality of greens means lentils that in a normal year would be feed might trade in the food market. Canada is by far the dominant green exporter.
Markets are still evolving. No. 1 Lairds are 27 cents. No. 2s trade around 24 cents. X3's aren't yet at 22 cents, but might get there. Lower grades are sparsely bid. True feed lentils will be hard to move.
Canola at contract lows
Canola futures made new contract lows recently, with early harvest pressure and a weaker bean complex setting a negative tone.
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Canadian producer deliveries were nearly 1 million metric tons during August, which is up sharply from 300,000 metric tons during August 2013. Old-crop stocks continue to flow into the system and basis levels have marginally improved to attract selling. Harvest is progressing in central Saskatchewan, while the southern regions of the prairies are plagued by excessive rains. This won't necessarily hurt the crop but delay the harvest pressure.
Expect further weakness in canola prices until the Canadian canola and U.S. soybean harvests are completed.
Statistics Canada estimated July 31 canola stocks at 2.4 million metric tons, which was sharply below traders' expectations. Total beginning supplies for 2014 to '15 crop year are forecast at 16.3 million metric tons, compared with 18.6 million last year. The market will start to factor in a tighter fundamental structure later in the fall. After harvest, expect prices to stabilize and slowly trend higher through the winter and spring. Next spring, the market needs to encourage acreage through higher prices, compared with other crops. This might not be much of an issue with softer wheat prices, but the need for higher production in 2015 will definitely support the market. Be patient with additional sales. Weaker meal and vegetable oil prices are resulting in a downward trend for the time being.
Feed barley grinds lower
Lethbridge, Saskatchewan, feedlots were buying feed barley at $164 to $166 per metric ton delivered two weeks ago. Adverse weather in Western Canada has confirmed the burdensome feed grain supply with feed wheat trading at $175 per metric ton in Southern Alberta.
Excessive moisture and frosts will continue to pressure domestic feed grain values in the short term. Corn continues to trade more readily into Southern Alberta as the market functions to encourage demand.
There is further downside potential given the current environment.
Looking forward, feedlot inventories in Alberta and Saskatchewan will increase by 30 percent from now until mid December. Stronger domestic demand will be supportive over the winter. Barley stocks will tighten and the barley market will function to encourage demand. U.S. corn acres are expected to be down next spring which will be supportive.
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Malt barley
Malt barley prices have risen nearly $1 per bushel in the past couple weeks because of excessive rains and poor quality results from the early harvest period. Malting companies might widen their quality parameters, but this will only occur once the total crop supply and quality is more certain. Prices have reached the range of $5 to $5.25 per bushel delivered. North Dakota is in a similar situation, so we could see U.S. malting companies step forward more aggressively later in the crop year.
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.
