Duvenaud: Oats prices steady, canola crush slows
WINNIPEG, Manitoba — It’s been a decent oats marketing year. Production fell from 4 million metric tons in 2013 to 3 million metric tons in 2014.
Somewhat surprisingly, there are still ample oats in farm storage. Oats get moved right off the combine, if possible, but it takes some incentive to move them again, at least, more incentive than higher-priced crops. Prices were all over the map until recently, but have been flat lately.
Most oats sales at the moment are farmers cleaning up old crop. It’s actually a bit hard to find a buyer for spot delivery. Paterson Grain in Morris, Manitoba, is $3.10 per bushel, although not exactly buying. But $3.10 targets are being hit with August payment. Pioneer in Mollard, Manitoba, is $3.15, but only taking delivery intermittently, as product is trucked to Can-Oat in Portage la Prairie, Manitoba. Emerson (Manitoba) Milling offers a $3.15-per-bushel spot bid, and generally bought through January to December, although it is taking the odd uncontracted shipment. Grain Millers at Yorkton, Saskatchewan, is bought up through new crop. It anticipates taking old-crop oats when bids open for new crop. Allan Johnston Grain Marketing is buying oats at $2.90 per bushel freight-on-board farm in Saskatchewan.
Oats prices have been holding steady recently, while wheat prices are rising. Accordingly, oats have become relatively cheap, compared with wheat. There is no longer a downtrend in Chicago oats futures, which are bottoming.
Timely rains have benefited oats. Southern Manitoba is looking at a bumper crop. Some parts of Saskatchewan, such as Carrot River, also have fabulous stands. There are definitely some problem areas, but they’re smaller than they were.
New-crop bids are about flat with old crop. Emerson Milling is bought up and full to February, where it will buy at $3.25 per bushel. Paterson is taking targets at $3.10 per bushel for August to September and paying $3.20 per bushel for January delivery. Grain Millers plans to open bidding for new crop at $2.90 to $3 per bushel. Some of this will be off-combine. Linear Grain in Carman, Manitoba, is at $3.16 per bushel for September delivery.
A recent development in oats marketing is the increased use of producer freight cars. Oats have become a big proportion of Western Canadian producer car use. It started a couple of years ago with Canada’s rail shipment crises when Chicago Board of Trade oats reached crazy premiums over Saskatchewan freight-on-board prices.
Western Canadian canola prices have been fluctuating in a narrow range in the past couple weeks. The weekly domestic crush has dropped from more than 150,000 metric tons per week earlier in July to just more than 124,000 metric tons.
Expect domestic crushers to extend maintenance periods in the summer from the weaker crush margins. At the same time, export business has been quiet, with only regular customers stepping forward at the higher levels. At the same time, canola deliveries have been a whopping 307,000 metric tons for the week ending July 5, while deliveries reached nearly 400,000 metric tons the previous week. Higher prices have caused a surge in farmer deliveries and we also see a fair amount of new-crop selling from farmers in Manitoba and North Dakota, where crop conditions are average to above-average.
World vegetable oil prices have failed to move higher in line with the soybean and canola markets. Western Canadian basis levels are rather wide for new crop positions, but the November to January canola spread is trading at even money to a small inverse. This suggests commercial companies expect available stocks to tighten after harvest.
World durum prices continue to percolate higher as the market adjusts to the below-average yields in Western Canada. Western Canadian durum crop estimates now range from 4.1 million metric tons, to 4.7 million metric tons which is down from 5.2 million metric tons last year. Given the smaller crop size, we expect a year-over-year decline in monthly deliveries during the harvest period. Approximately 50 percent of the French durum crop has also experienced adverse dry conditions in the past month during filling.
Greece struggled with rain during harvest, while the Spanish crop is largely sold out early in the crop year.
The U.S. Department of Agriculture estimated the U.S. durum crop at 2.1 million metric tons, up from the 2014 production of 1.4 million metric tons. U.S. millers will be anxious to secure their supplies from the domestic crop which will limit their export program, especially if the U.S. farmer is a reluctant seller early in the crop year.
Duvenaud publishes the Wild Oats Grain Market Advisory. For a free copy, call 800-567-5671 in Western Canada and North Dakota. All others call 204-942-1459.