For three-times-daily market reports from Don Bousquet and RNI, visit “ICE Futures Canada updates” at www.manitobacooperator.ca
Grain and oilseed prices at ICE Futures Canada in Winnipeg closed the week ended Nov. 6 mixed. Canola was pressured down by weakness in the U. S. soybean market and firmness in the Canadian dollar. The advancing harvest in Western Canada also weighed on prices, as did sluggish demand.
The demand by China that Canada export only blacklegfree canola was also unresolved, and that weighed on prices. Western barley was mainly higher as farmer selling was very slow.
Chicago soybean and corn markets were mixed during the
week. There was choppiness ahead of the U. S. Department of Agriculture’s Nov. 10 production and supply/demand reports. Soybeans were pressured down by the advancing harvest and a favourable weather forecast through this week. The losses came despite strong export demand, with China still a big buyer. Corn rallied and then fell back to modest gains on the week. The improved harvesting weather weighed on prices. Giving some support, however, were strong demand and concerns about the U. S. corn crop’s quality.
U. S. wheat futures also rallied and then fell back to just small gains. The market dropped back to almost unchanged on the week, pressured down by sluggish demand, favourable weather to finish seeding the U. S. winter wheat crop, and the large global wheat supply.
The markets were preparing themselves for this week’s USDA production and supply/ demand reports, which unfortunately come out after press time. On Nov. 4, both Informa Economics and FCStone brought out their latest production estimates for the U. S. crop.
Informa pegged the U. S. corn crop at 13.064 billion bushels. This was down from its previous estimate of 13.127 billion bushels, but still not as low as the October USDA forecast of 13.018 billion bushels.
FCStone forecast the U. S. corn crop at 13.004 billion bushels, down from its last estimate of 13.064 billion bushels.
One of the interesting things about these forecasts is that they’re lower production estimates than in October. This suggests weather has taken its toll on the crop. Neither one of them mention the quality problems that have occurred in the corn crop.
This will likely mean good-quality corn will command a premium and be used to blend up the poorer-quality supplies. It also means more feed wheat will likely be used in livestock feed, which will help to support the wheat markets longer term.
For soybeans, Informa estimated the U. S. crop at 3.333 billion bushels, down from its last forecast of 3.383 billion bushels, though still above the October USDA forecast of 3.25 billion bushels.
FCStone pegged the 2009 U. S. soybean crop at 3.379 billion bushels. This was actually up from its Oct forecast of 3.329 billion bushels.
The consensus generally is that there will be a large U. S. soybean crop, which will weigh on the market throughout the winter. However, the need to keep soybean acres from shifting to corn will help to support soybean values.
The main negative factor that will be hanging over the soybean and canola markets will be the South American soybean crop. The El Nińodriven weather systems are generally good news for those soybean crops. The latest estimate for the Brazilian crop is 63 million to 64 million tonnes, up from 57 million last year. For Argentina the crop estimates are 54.5 million tonnes, up from last year’s drought-reduced crop of only 32 million tonnes.
Negative pressure on the market from the South American crops will appear from mid-to late winter. It’s likely that the early winter prices will be better than spring values, unless something happens to the South American soybean crop.
There was some interesting reading on the wheat outlook this past week. Joachim von Braun, director general of the International Food Policy Research Institute, said wheat production is “troubling” and he forecast another wheat price spike within four years. He also predicted the average wheat price will double over the next three decades.
RUMOURS HAVE IT
Every crop year there are a load of interesting rumours that circulate in the grain trade, although they rarely get out to the public. This year is no different.
The Chinese move (out of the blue) to demand blacklegfree canola from Canada after Nov. 15 has spawned an interesting rumour. The talk is that the move was actually made to chastise Canada for the fact that Prime Minister Harper was not at the opening of the Beijing Olympics, as most other world leaders were. The talk is that the Chinese want a little grovelling from Harper and they also want a “big stick” to hold over his head so that he doesn’t talk about China’s human rights record and about Tibet during his visit there at the beginning of December.
While this does seem to be a bit extreme, the Chinese are very concerned about “face.” They certainly took note that Canada was critical of China’s human rights record and treatment of Tibet and that Canada showed it by the absence of the prime minister at the opening of the Beijing Olympics this past summer.
Another rumour tied to the prime minister’s trip later this month to India and then to China is that there will be orders for Canadian peas unveiled in both India and China. Pea industry sources have been scratching their heads about the lack of pea buying by India and China this fall.
This wouldn’t be the first time this kind of thing has happened. During Jean Chrétien’s trip to China a whole bunch of business and agriculture-related announcements were held back for the prime minister to make.
Another rumour making the rounds right now involves flax. Country elevator price bids for flax have unexpectedly climbed to the $9.50-per-bushel range in southwestern Saskatchewan, as well as at some Manitoba points close to the border.
The rumour is that the flax is moving into the U. S. as the U. S. makes sales of its own flax to Europe. Watch the shipping out of Duluth, Minn., traders say, and you will see flax moving to the EU. Another component of this rumour is that some of that exported flax may actually be Canadian, blended with the U. S.
One cash dealer said the rumour makes sense because a month to six weeks ago, you couldn’t give flax away at $6/bu., and now they’re paying $9.50/bu. for it… at least in the southern part of the Prairies.
– Don Bousquet is a well-known market analyst and president of Resource News
International (RNI), a Winnipeg company