Downward price action was augmented by a generally weaker tone in outside oilseed markets during the week, including Malaysian palm oil, European rapeseed futures and Chicago Board of Trade (CBOT) soybean values.

Farmers, also now confident of harvesting a canola crop in the fall, have begun to unlock their bins of old-crop canola and to deliver to country elevators. Many farmers who have started to move their canola may have had that $700-a-tonne price target in mind, based on conversations with some oilseed brokers — but with recent price weakness, those farmers have decided to take advantage of current values.

There remain opportunities to deliver against the nearby July future, but a lot of outlets are now accepting deliveries against the November contract.

The downside in canola was restricted by scale-down pricing by commercials. A lot of that price action was said to be covering export business as well as domestic crusher requirements. The export demand coming forward was believed to be covering both routine sales and fresh Chinese demand.

Adding to the support in the canola market were concerns about wet, cool weather which has dominated Alberta in particular. The worries were confined to select pockets of the canola-growing regions in that province. However, similar concerns were also now starting to surface in Saskatchewan and Manitoba.

The crop concerns are not likely to send canola significantly higher, but can be viewed as one of those weather scares that have been talked about over the past couple of weeks.

There continues to be absolutely no interest in trading ICE milling wheat, durum or barley contracts.

Bearish soy numbers

CBOT soybean futures were pushed lower during the week ended Friday with weakening demand and a bearishly construed supply/demand balance sheet from the U.S. Department of Agriculture.

USDA left the U.S. soybean supply/demand table unchanged from its May report, with total 2013 U.S. production still estimated at 3.39 billion bushels. U.S. ending stocks were left unchanged, with old crop at 125 million bu. and new crop at 265 million bu.

Globally, USDA trimmed soybean ending stocks for 2012-13 by 1.3 million tonnes to 61.2 million. New-crop ending stocks were also lowered from May estimates by 1.27 million tonnes, largely due to lower beginning stocks.

Weather also played a role in the soybean declines, with the return of warm and dry conditions allowing U.S. farmers to finish off seeding. Improved weather was also seen aiding in the development of the recently planted crop.

The fact U.S. farmers were successful in getting the crop seeded was viewed as bearish for futures. However, there continue to be a few individuals who are adamant U.S. soybean output will be down, given how late the crop was put into the ground, and are certain yields will be well below normal.

CBOT corn values also suffered a price setback during the week with good weather for crop development and expectations of a record-large harvest in the fall.

A bearish aspect of USDA’s report on corn came from its decision to not lower its new-crop supply forecast for 2013-14 by as much as the trade had been anticipating.

USDA now projects new-crop U.S. corn carry-out as of Aug. 31, 2014 at 1.949 billion bu. This would be down from its forecast last month of 2.004 billion, but well above the trade expectations averaging 1.758 billion bu.

USDA made numerous adjustments to the U.S. corn supply/demand balance sheet. It lowered yield by 1.5 bu./ac., citing delayed planting in the western Corn Belt that raised the likelihood that seasonally warmer temperatures and drier conditions in late July will adversely affect pollination and kernel set in a larger share of this year’s crop. It reduced the average yield to 156.5 bu./ac. but made no revisions to planted acreage.

Even with a 135-million-bu. cut, USDA still sees 2013 U.S. corn production at 14.005 billion bu., an extremely large crop.

Meanwhile, USDA increased, rather than lowered, its old-crop U.S. corn ending stocks projection. The old-crop ending stocks projection was raised by 10 million bushels as USDA increased its U.S. corn import total to 25 million bushels.

The slightly larger old-crop carry over (769 million bu.), plus USDA’s adjustments to 2013 new-crop production puts new-crop ending stocks at 1.949 billion bu., 55 million lower than USDA’s May estimate, but well above trade expectations. The stocks-to-use ratio declined slightly to 15.2 per cent, more than double the old-crop ending stocks-to-use ratio of 6.9 per cent.

Globally, old-crop corn ending stocks declined to 124.3 million tonnes from 132.2 million. New-crop ending stocks were lowered by 2.8 million tonnes to 151.8 million on lower forecasted production and feed use.

Wheat futures on the CBOT, MGEX and KCBT generally lost ground during the reporting period, with most of the bearish news associated with the adequate global wheat supply situation. Seasonal pressure also added to the KCBT wheat market given that the harvest of the U.S. winter wheat crop was now underway in select locations.

USDA projected U.S. all-wheat production at 2.08 billion bu., up from May estimates just shy of the highest trade estimate. Of that total, U.S. winter wheat production increased to 1.509 billion bu., higher than trade estimates.

U.S. hard red winter wheat production, at 781 million bu., is two per cent larger than last month’s estimate. USDA also boosted its estimate of U.S. soft red winter wheat production two per cent higher, to 509 million bu. White wheat production increased slightly from May and came in higher than the average trade guess.

U.S. old-crop wheat ending stocks for 2012-13 increased by 15 million bu. due on slower export demand. New-crop 2013-14 ending stocks were lowered by 11 million bu. from May to 659 million bu., within the range of trade estimates, as increased production and export forecasts offset the decline in beginning stocks.

Globally, 2012-13 ending stocks for wheat declined slightly to 179.9 million tonnes; however, 2013-14 ending stocks came in lower than trade estimates at 181.3 million, a 5.1-million-tonne decline from USDA’s May estimates, reflecting lower foreign production.

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Canola futures on ICE Futures Canada’s trading platform trended to the upside during the reporting period, with the weak Canadian dollar and steady demand from the commercial sector helping to encourage the advances. Much of the commercial interest was the pricing of routine export business, as well as covering new-crop domestic processor requirements.

Some processors were said to be still aggressively seeking canola, but for spot November delivery. The basis at some locations was easily $89 to $100 over the November canola future.

Support in canola was also derived from the need to keep a weather premium built into values, just in case. A lot of market participants are commenting that canola-seeding operations were progressing at a quick pace and early-seeded crops were developing very well. However, the crop is far from being harvested and there will be a few weather scares between now and the fall.

Some of the strength in canola also came from delays in putting the U.S. soybean crop into the ground, especially in the key growing regions of the U.S. Midwest.

ICE Futures Canada officials finally were in touch this week, and while they acknowledged there has been little interest shown for the milling wheat, durum and barley contracts, the exchange is not ready to give up on those futures quite yet. The exchange pointed out that conditions in the global wheat market are slowly changing and may help to encourage some use of these risk-management tools. Efforts will also be made this summer to encourage the big grain companies, as well as end-users, to give these futures a chance.

Tight soy supplies

Soybean futures at the Chicago Board of Trade (CBOT) posted some significant advances during the reporting period, with a lot of that upward price momentum linked to the tight supply situation.

Not only are old-crop stocks seen to be less than adequate, but worries about when new-crop supplies will be available have also surfaced. There had been ideas that planting of the soybean crop would be closer to being done and supplies would begin to become available sooner. However, it now appears these new-crop stocks will not be available until later in the autumn. Late development also leaves the soybean crop susceptible to an early frost.

Advances in soybeans, however, were capped by the taking of profits as well as cancelled export business by China, as values for the commodity began to get higher than China likes. Ample availability of cheap soybeans from South America made it easier for China to cancel the high-priced product from the U.S.

Corn futures at the CBOT also experienced some decent price gains, with much of the upward momentum again associated with the weather. The big problem for corn has been that while seeding of the crop has been decent in most of the smaller producing regions in the U.S., the crop in the U.S. Midwest is far from being in the ground. Extremely heavy precipitation has kept farmers in that area out of the fields, and outlooks calling for additional precipitation in the weeks ahead have prompted some participants to believe “millions of corn acres” will not be planted this summer.

If those huge corn acres are not planted, the ideas are that soybean area will grow as a result. That could temper the upside in those values as a result. As for the delays in seeding soybeans, a number of market participants are still convinced there is plenty of time to put that crop in the ground, as it’s not unusual to see those planting operations go until at least the second week of June.

Weather uncertainty managed to help wheat futures on the CBOT, MGEX and KCBT push higher during the reporting period, with spillover from the gains in corn also adding a friendly price floor. The upside in wheat was capped, however, by news that volunteer GM wheat was recently discovered at an Oregon farm in a field that grew winter wheat in 2012. The wheat showed resistance to the herbicide glyphosate. The wheat in question is reported to be a strain that was field tested by Monsanto from 1998 to 2005, but was never commercially produced as international opposition to GM wheat caused the company to stop the tests.

The GM wheat is said to be safe to eat, with no sign that any entered the market, according to the U.S. Department of Agriculture. While GM soybeans and corn are common in the U.S., no genetically engineered wheat has ever been approved for production in the country. USDA is now investigating how the GM wheat came to be on the field and whether or not it is more widespread. Many importing countries are opposed to GM wheat, and Japan announced it was suspending purchases of U.S. western white and feed wheat in response to the discovery. The European Union has also said it will test incoming shipments and block any that contain GM wheat.

Field tests on glyphosate-resistant Roundup Ready wheat were also conducted in Western Canada from 1998 through 2004.

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“Some seeding has occurred in the extreme southern areas of the province so far, but I would say those operations are still very preliminary in nature,” said Neil Whatley with the Alberta Ag-Info Centre in Stettler.

The wet and cold spring caused farmers to hold off on planting as early as they did last year, he said. For comparison, some fields in Alberta had been fully seeded by the end of April 2012.

Soil moisture in Alberta was rated as good to excellent with no one area considered as dry at this time, Whatley said. Even historically-dry southern areas had a good spring snowfall to work with, leaving the area in good shape, he added.

Spring weeds were a bit of a problem for some farmers in the central and northern areas of the province, but appropriate measures have been applied to remove any problems, he said.

Winter wheat and fall rye crops in the province were said to have had few issues and to be in relatively good shape, Whatley said.

No real pest problem has presented itself yet, Whatley said, although farmers were preparing for some wireworm issues in some areas.

In terms of crop disease, issues for canola and some cereals were expected, but farmers in the province were trying to get a head start by applying the appropriate chemicals to control these diseases, he said.

— Dwayne Klassen writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

Related stories:
Cutworms turn up in S. Alta. winter wheat, May 7, 2013
Prairie seeding outlook improves with heat, May 7, 2013

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“Based on my calculations, crush margins for canola basis the July contract have improved significantly over the past month to around the $40 per tonne area,” said Bill Craddock, a southern Manitoba farmer and private commodity trader.

In early April, crush margins for processors had been running in the $23 per tonne range, but had also dropped to as low as $18 per tonne during that time frame. At the same time a year ago crush margins for processors had been running in the $75-$85 per tonne level.

Craddock linked the improvement in margins to U.S. soybean values undergoing an upward price push and canola values being reluctant to follow suit. The increase in the value of the Canadian dollar did temper some of the crush margin improvement.

There also appears to be more canola around then what the numbers are suggesting, making it possible for the processing sector to secure supply and meet commitments, said Mike Jubinville, an analyst with ProFarmer Canada.

Cash bids for canola at elevators have eased somewhat, he noted, but they continue to hold at fairly high levels if the processors are involved.

Figures from the Canadian Oilseed Processors Association, for the week ended May 1, revealed 5.291 million tonnes of canola have been crushed so far in the 2012-13 crop year. That was slightly ahead of the 5.176 million-tonne pace at the same time a year ago.

Agriculture and Agri-Food Canada, in its April supply/demand table, pegged the 2012-13 canola crush at 6.5 million tonnes, which would be down from the 6.9 million-tonne pace seen in 2011-12. For 2013-14, Canada’s canola crush was seen hitting a record seven million tonnes based on AAFC projections.

— Dwayne Klassen writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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“Because the crop insurance deadlines are later for sunflowers than other crops, we could see a switch to the crop this spring,” said Darcelle Graham, NSAC’s executive director at Carman, Man.

Statistics Canada, in its recent planting intentions report, estimated farmers in the West, primarily in Manitoba, would seed 95,000 acres to sunflower varieties. In the spring of 2012, 100,000 acres were planted to sunflowers in Western Canada.

Graham said NSAC was working with sunflower plantings in 2013 coming in closer to 100,000 acres.

However, she felt with the cold and wet delaying the seeding of other crops, farmers in Manitoba may use the later crop insurance deadline to their advantage and plant a few extra acres to sunflowers rather than leaving fields bare.

Using Manitoba as an example, she said June 15 was the latest day for farmers to be eligible for crop insurance.

Graham said farmers in choosing to plant sunflowers, were likely to lean more toward the confectionary variety, given that some attractive contracting has been offered by companies.

“In a normal season the split between confectionary and oil varieties of sunflowers is about 50-50,” she said.

Graham acknowledged that should the weather improve, it wouldn’t take farmers in Western Canada very long to get seeding operations rolling and the original crop intentions seeded.

If that proves to be the case, area to sunflowers would likely be closer to the StatsCan forecast if not a touch lower.

— Dwayne Klassen writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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“Overall there was little in the way of any winterkill reported so far this spring,” said Peter Johnson, a provincial cereal crop specialist at Stratford, Ont.

Out of the 950,000 acres of winter wheat seeded in the province by early November, he estimated only an isolated area in some non-traditional growing regions may have suffered some sort of damage.

In the fall of 2011, farmers in the province seeded 725,000 acres to winter wheat, with 15 per cent of the crop consisting of hard red. In the fall of 2012, hard red acres fell to 10 per cent. Johnson linked that decline to problems getting a high protein content upon harvest.

“Anything that failed to meet the 10.5 per cent protein requirement was graded as feed, which in turn resulted in lower prices being paid to the farmer,”‘he said.

Little of the province’s crop had broken dormancy due to the cool temperatures.

Johnson noted temperatures would now have to drop below -15 C and remain below that level for an extended period of time in order to cause any damage to the winter wheat crop.

The harvest of Ontario’s winter wheat crop was forecast to resume more traditional patterns this year.

— Dwayne Klassen writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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“The numbers will provide a good starting point to work with on paper, but weather, prices and other agronomic factors will likely result in some changes to the planting intentions,” said Ken Ball, a broker with PI Financial in Winnipeg.

It’s important, he said, to realize the numbers released Wednesday were a reflection of what farmers were thinking back in February or early March, considering the survey was taken at the end of March and beginning of April.

Jerry Klassen, manager of GAP SA Grains and Produits, agreed the seeding intention projections from Statistics Canada will likely see some changes in future updates — but still provide a base with which individuals can begin to work.

“These are likely going to be the highest all-wheat estimates and the lowest canola projections we see this year,” said Mike Jubinville, an analyst with ProFarmer Canada in Winnipeg.

Farmers had looked at planting spring wheat based on the need to switch canola out of their crop rotation due to increasing disease issues, he said.

“Farmers were also looking at the fact that old-crop spring wheat values were in the $8-$9 per bushel range, which is an awfully attractive value,” Jubinville said.

Some of the attraction of Canadian farmers moving to wheat reflected the fact that they were now feeling confident about the new marketing environment, Klassen added.

All-wheat area in Canada was pegged by Statistics Canada at 26.719 million acres. Pre-report ideas had suggested the government agency would put all-wheat area in a range of 23.325 million to 25.325 million acres. In the spring of 2012, 23.798 million acres were planted to all wheat in Canada.

Canola area in 2013 was estimated at 19.133 million acres, which was below pre-report ideas of 20 million to 21.251 million acres and compares with the 21.531 million seeded in 2012.

The area seeded to all wheat included a lot of durum, Jubinville said. “Given today’s weather environment, those intentions are likely to decline, as durum is a long-season crop.”

StatsCan pegged durum area in Canada at 5.105 million acres. This compares with pre-report estimates of 4.1 million to 5.1 million acres and the 2012 level of 4.68 million.

Some of the area that had been intended to go into all wheat in the report will likely be shifted to canola and possibly barley, especially if seeding delays in Western Canada continue.

The strong financial returns of canola and the short-season capacity of barley were linked to the ideas of farmers bypassing wheat, he said.

The lower-than-anticipated barley acreage forecast in the report came amid ideas that farmers are losing interest in growing feed barley and that maltsters have not been aggressive enough and willing to pay for malting quality barley.

“Feed users are now looking at importing cheaper DDGs (dried distillers grains) from the U.S. than paying up for feed barley, particularly in southern Alberta,” Klassen said.

Jubinville said malting companies don’t seem to be in any kind of hurry to secure high quality barley from farmers, resulting in alternative crops being planted.

StatsCan estimated 2013 barley area in Canada at 7.24 million acres. Pre-report ideas ranged from 7.5 million to eight million acres. In 2012, seeded area to barley in Canada totalled 7.405 million acres.

Wednesday’s most surprising acreage estimate was the figure StatsCan provided for summerfallow, a meagre 3.527 million acres. Most pre-report projections had anticipated 4.399 million to as high as six million acres. In 2012, 4.485 million acres of cropland in Canada were left unseeded.

— Dwayne Klassen writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

Table: Recap of Statistics Canada’s acreage report for the period ended April 3, 2013, plus pre-report expectations for comparison purposes, in millions of acres.

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StatsCan’s planting intentions survey, conducted the week of March 25 to April 3 and due out Wednesday, included 13,805 farmers from across Canada.

A late start to planting will likely change some of those intentions, with some farmers moving to shorter-season crops to accommodate the delays in planting, said Jerry Klassen, manager of GAP SA Grains and Produits in Winnipeg.

“The report will provide the industry with a look at what was expected to go into the ground, but there will also be adjustments going forward,” he said.

The area that could go unseeded due to flooding across parts of Western Canada may rise from early expectations, said Mike Jubinville, an analyst with ProFarmer Canada.

The area left unplanted, or as summerfallow, across Canada was expected to range anywhere from 4.399 million acres to as high as six million. In the spring of 2012, 4.485 million acres were left as summerfallow. Estimates at the higher range of the scale took in the late spring melt and delays in planting the crop.

Klassen pointed out that an anticipated shift in the weather pattern was anticipated in roughly 10 days to two weeks, with temperatures and conditions turning a bit warmer and drier.

“A period of 14 to 20 days of decent weather will be enough to see most of what farmers intended on planting this spring be put into the ground,” he said.

Should seeding operations be delayed into the late May or early June period, Jubinville noted, the chances are good that farmers will switch to short-season crops. “The change will come as crop insurance deadlines approach.”

StatsCan’s report is expected to reveal that farmers in Canada plan on seeding 20 million to 21.251 million acres of canola this spring. During the 2012 season, 21.531 million acres of canola were seeded, but production, due to below-normal yield potential amid poor weather, came in well below expectations.

Canola crop rotations have been pushed to the brink in past years by farmers, but strong financial considerations along with the crop usually being the main beneficiary of last-minute changes, means area could still be higher, Klassen said.

Both Klassen and Jubinville said that should normal canola yields be realized, canola production in Canada could easily top the 15 million-tonne level and establish a new all-time record high. The Canola Council of Canada had already established a goal that canola production in Canada would hit 15 million tonnes by the year 2015.

“If realized in 2013-14, that goal would be hit a bit earlier than expected,” Jubinville said.

One of the crops that had been expected to grow in size this spring was wheat. However, because the crop is not as competitively priced as alternatives such as flaxseed, barley and oats, the jump in area will not be as great, Jubinville said.

Pre-report ideas suggest all wheat area in Canada may range between 23.325 million and 25.326 million acres in the spring of 2013. In the spring of 2012, 23.825 million acres were seeded to all wheat in Canada.

Barley plantings in Canada, meanwhile, were seen ranging anywhere from 7.5 million to as high as eight million acres this spring. Last year, barley area in Canada totalled 7.405 million acres. Much of the jump in seeded area was tied to malting barley companies encouraging farmers to plant the crop by offering improved bids in long-term contracts.

– Dwayne Klassen writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

Table: Preliminary estimates for some of the crops to be included in Wednesday’s Statistics Canada seeding intentions report, in millions of acres.

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“Based on my calculations, crush margins for canola dropped to their lowest level in quite some time late last week to around the $23 per tonne area,” said Bill Craddock, a southern Manitoba farmer and private commodity trader. In March, crush margins for processors had been running in the $28 to $35 per tonne area.

At the same time a year ago crush margins for processors had been running in the $75-$85 per tonne level.

Craddock linked the decline in crush margin to the fact that domestic processors have had to pay up in order to encourage farmers to deliver canola to their doorstep.

One private analyst had crush margins actually working in negative territory, but that was linked to that individual’s crush margin calculation.

“Whether crush margins were in negative or positive price territory, the idea of the processing pace staying strong was unlikely given the old-crop supply situation,” Mike Jubinville, an analyst with ProFarmer Canada said.

He acknowledged processors in Western Canada were pretty resilient and probably will be successful in obtaining the necessary canola to fulfil commitments both from a nearby and deferred standpoint. At some point, however, the pace will need to slow to avoid running completely out of the commodity before new-crop supplies are available in the fall.

“The only way processors can continue to maintain a strong crush pace is if canola stocks are actually much higher than what is currently being forecast,” Jubinville said.

He said it was conceivable that Statistics Canada has underestimated the size of last year’s crop.

“Considering the USDA was able to find extra old-crop soybeans lying around, even though everyone else had thought supplies were virtually depleted, there are ideas that a similar situation could occur with Canada’s government agency,” Jubinville said.

Statistics Canada will release its grain stocks in all positions report on May 3.

As of April 3 in the 2012-13 crop year, data from the Canadian Oilseed Processors Association shows that 4.766 million tonnes of canola has been crushed, which compares with 4.595 million at the same time a year ago.

— Dwayne Klassen writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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Cash bids for red lentils have climbed to around the 23- to 25-cent per pound area, depending on the region of the Prairies, confirmed Jackie Kress, senior grain buyer for Legumex-Walker.

The roughly three-cent jump in a very short period was in response to red lentil tenders from India’s subcontinent, she said.

“The tenders helped to inflate the bids for red lentils,” she acknowledged, but added that as quick as the bids rose, they may also disappear just as fast once the business has been covered.

“To tell you the truth, we felt the increase was a bit unrealistic,” Kress said.

While the jump in values is certainly encouraging to farmers, the stronger bids were not likely to have all that much of an impact on seeding decisions this spring, she said.

“With the producers we have been talking to, the ones who had red lentils in their crop rotation plans will follow through with those intentions,” she said.

Kress acknowledged a lot of competition among the various crops in terms of what will be seeded this spring.

As an example, Kress said, based on her understanding, farmers have already been busy forward-contracting barley acreage, with the signing including an ‘Act of God’ clause that had previously not existed.

“I had never heard of barley having an ‘Act of God’ clause,” Kress said, adding this was an example of the changes that have occurred since the removal of the Canadian Wheat Board’s monopoly powers.

Farmers are now looking at seeding plans with the intention of pulling in viable cash crops, she said.

“Red lentils have traditionally been a high-yielding, high-return crop and acreage should be fairly stable this spring,” Kress speculated. Weather conditions at planting time will ultimately decide how many red lentils go in the ground.

The bulk of the crop is grown in Saskatchewan, with red lentils not necessarily fond of overly wet conditions, she said.

She also acknowledged there has been some forward-contracting of red lentils by farmers, with new-crop bids now in the 20- to 21-cent per pound area for No.2 or better red lentils.

Red lentil acreage in Western Canada for 2013 was estimated at 1.038 million acres, according to Bobby Morgan, a pulse analyst with Agriculture and Agri-Food Canada. In the spring of 2012, 951,000 acres were seeded to red lentils.

Morgan attributed the rise in red lentil area to the jump in values and anticipated steady demand from the Indian subcontinent.

— Dwayne Klassen writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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