Canola prepares for larger acreage
WINNIPEG, Manitoba -- The 2013 to '14 Canadian canola carryout is expected to finish at more than 3 million metric tons, which will be a record. The commercial pipeline and on-farm storage will be saturated with canola stocks at the end of the cr...
WINNIPEG, Manitoba -- The 2013 to '14 Canadian canola carryout is expected to finish at more than 3 million metric tons, which will be a record. The commercial pipeline and on-farm storage will be saturated with canola stocks at the end of the crop year. This will keep basis levels historically wide.
At the same time, the canola market is gearing up for larger Canadian canola seeded acreage. Analysts are anticipating a 7 to 11 percent year-over-year acreage increase, which will temper upside in new-crop prices. The Canadian system will have to accommodate a burdensome supply situation from August through December if average yields materialize in Western Canada.
Outside influences continue to weigh on the canola market. It appears that Brazilian soybeans are trading into the U.S. Gulf, alleviating the tight supply situation in the U.S. Poor Chinese soybean crush margins are also tempering further export sales of U.S. and Brazilian soybeans to China. Palm oil values have stabilized, which has supported canola crush margins, but the world vegetable oil market will remain volatile into the summer.
Feed barley remains stable
Southern Alberta feedlots have been purchasing barley in the range of $190 to $193 per metric ton for nearby delivery. Road ban season has contributed to lower farmer selling, which remains supportive while feedlot inventories are at seasonal highs. The barley market is expected to remain flat in the next few weeks and then, depending on acreage and growing conditions, prices will start to adjust to the new-crop supply scenario. We anticipate a 5 to 10 percent decline in Canadian barley acreage. It is important to realize that the fundamentals are not getting more bearish but turning neutral to slightly bullish. Feedlots are shying away from new crop commitments until the fundamentals are more certain. U.S. corn seeding will likely be delayed, given the cool and wet conditions, and there is concern about the crop in the early phases of development if this weather trend continues.
The export market is rather undefined at this time for remaining old-crop demand and new-crop positions. Russia and Ukraine barley production is expected to be down approximately 5 percent from last year as a result of dryer conditions in the past 60 days. This is becoming a focal point of the new-crop price structure and will be critical for the world barley market. Middle Eastern buyers have been quiet because of limited offers from the Black Sea region. The export market could have more influence on Western Canadian prices during the next crop year, and it will be important to watch these developments to plan our marketing strategy.
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