Western Canada wheat plantings to drop
By: John Duvenaud, John Duvenuad
WINNIPEG, Manitoba — Rob Saik of Agri-Trend estimates western Canadian wheat plantings will drop by 6 percent this year because of breakeven prices and lots of farmer stocks. Durum will be up 15 percent.
Canola will increase marginally. Lentil and pea plantings will be strongly higher. Oats will have a small increase.
Canola uptrend continues
Canola prices continue to ratchet higher on the increase in commercial demand and strength in meal. Exports for canola could reach 9.2 million metric tons (9 million in 2013 to
’14). The canola carryout will finish near 1.3 million metric tons, down sharply from 2.4 million in 2013 to ’14. Stocks are becoming tighter and the market needs to encourage acreage. Canola prices have potential to strengthen further. The market will incorporate a risk premium as a result of the uncertainty in production.
Outside influences are supportive. Soybeans are holding value because of the stronger meal demand. Despite the large increase in U.S. soybean ending stocks for 2014 to ’15, the meal market is encouraging the crush pace to run full steam. Analysts have trimmed Brazilian soybean production because of dryer conditions that materialized earlier in January. The fundamentals for beans are not becoming more bearish, but rather stabilizing and limiting the spillover pressure on canola.
Milling wheat prices consolidating
Milling wheat prices have been consolidating in a narrow range in the past couple weeks. The downside is limited. Be patient with further sales. Four factors could drive wheat higher later in spring. First, the Russian winter wheat crop has potential to be down 30 to 40 percent because of adverse conditions going into dormancy. Second, lower wheat production could cause the Russian government to continue with a limited export policy into new crop. Third, U.S. winter wheat acres are down 4 percent and U.S. and Canadian spring wheat acres might be lower. Finally, we anticipate a 3 to 4 percent decline in U.S. corn acres, which has potential to result in stronger feed grain values. Given the large domestic demand for U.S. corn because of ethanol production, the corn market will be sensitive to growing conditions. Markets have potential to strengthen in late spring and summer if dryer conditions materialize.
Export demand for Canadian wheat will improve once the port of Thunder Bay, Ontario, opens later in April, which will be supportive for basis levels. Export buyers will be more aggressive if adverse conditions materialize in Russia and the U.S. winter wheat regions. Be patient with further sales.
Domestic prices are hovering at abpiyt $5.50 per bushel for new-crop malt barley. European malt barley continues to dominate the world market for both old and new crop delivery positions. In order to be competitive on the world market, central Saskatchewan prices need to be in the range of $4.75 to $5. Therefore, domestic prices are at a premium to the world market. Capture this opportunity. If normal conditions materialize in Canada, the U.S. and Europe, we could see further downside in domestic and export prices.
Durum market update
Durum prices have been under pressure since November. We hold back sales on 20 percent of old crop until we see the upcoming crop develop.
Most U.S. mills have coverage into May or June limiting nearby demand.
The European market is also softer with limited demand until the new crop French harvest. Note that new-crop French durum is the equivalent of $6.50 per bushel in Saskatchewan for No. 2 Canadian Western Amber Durum. North Africa will start buying new crop European durum in June. We don’t see any further upside in the market.
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