CNS Canada — A Japanese ban on Canadian wheat might eventually push more wheat into feed markets, but traders say that’s not happening so far.
Japan, Canada’s No. 2 wheat buyer after the U.S., instituted the ban last Friday after genetically modified wheat was discovered growing in Alberta. GM wheat is not approved for commercial use.
South Korea also banned Canadian wheat imports, but it buys only about 245,000 tonnes per year, while Japan last year bought 1.4 million tonnes.
Allen Pirness, senior trader at Market Place Commodities in Lethbridge, said he hasn’t seen more wheat enter the feed market, though he added, “I can see the path for that line of thinking and I wonder about it myself.”
Lower production forecasts for China and Russia may pick up some of the slack in demand caused by Japan’s ban, he said.
“That really would help to resolve the wheat issue,” he said.
Samantha Metcalfe at Market Master in Edmonton said she’s been discussing possible effects of the wheat ban with fellow traders.
“It might be too early to see much effect, but I don’t know how long the Japan ban will stay. It’s tough to say if that’s already started influencing things or how badly that’s going to influence things.”
In barley markets, Metcalf said prices have continued their recent slide and even took a more abrupt fall this week to about $4.50 per bushel.
“So, it definitely did soften quite a lot and pretty suddenly too.”
She attributed that to recent rains which eased many growers’ concerns about the crops in the ground, which in turn made them more comfortable with selling stored supplies.
Many feedlots have eased off feed purchases, she added, as they head into summer when they typically carry fewer animals.
At Lethbridge, Pirness said he’s still seeing about $5.30 a bushel for barley.
“It’s not like we’re getting flooded with barley. You still have to go out there and look for it,” he said.
A major factor he sees affecting markets now is the selloff in the soybean complex, which has significantly lowered prices for dried distillers grains.
“We have seen the U.S. dried distillers grains come off here because of the soy complex falling apart.”
As global trade war fears mount, reports have surfaced of China stepping into international feed markets and making major purchases.
Cattle producers and feedlots in Australia are reporting difficulty with sourcing affordable domestic feed supplies, with China behaving boldly and outbidding other buyers
Pirness and Metcalfe haven’t seen that in Canada.
“I would say probably not, because we haven’t seen any significant spiking on that front,” said Metcalfe.
Pirness agreed, but wondered, if U.S. soybeans are not being shipped to China, whether that will support canola prices, which for now have been shielded from following soybeans down by the declining Canadian dollar.
“All bets are off when it’s a trade war. You just don’t know what the substitution effect will be and where the tariffs will come home to roost and where they’ll make their largest impact.”
— Terry Fries writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.