Waters Remain Muddied For Seeding Predictions

Canola futures on the ICE Futures Canada trading platform were mixed during the week ended April 8, with old-crop months down and new-crop contracts posting advances.

The sell-off of the nearby May and July canola futures reflected the ample old-crop supply situation and the absence of demand from the domestic and export sectors. Talk surfaced that much of this demand through the remaining couple of months in the 2010- 11 crop year has now been covered.

The widening out of basis levels by elevator companies this week confirmed this belief. Producers, however, remained fairly aggressive sellers despite the lowering of cash bids and only augmented the downward price movement.

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Support in the new-crop contracts, beginning with the November future, was stimulated by the growing concern over the delay in spring seeding. Producers in parts of southern Alberta last year at this time were already fine tuning their farm machinery for their seeding operations. However, excessively wet conditions and continued snowfall have kept these preparations at a minimum. The onset of flooding in the agricultural regions of eastern Saskatchewan and in Manitoba’s Red River Valley area has also created fears of a late start to seeding.

Along with the delays in seeding come concerns that the crops will be vulnerable to frost come harvest time.

BARLEY DORMANT

Meanwhile, the flurry of activity that surfaced in western barley contracts on the ICE platform last week disappeared, leaving the commodity once again to lie dormant.

Chicago Board of Trade (CBOT) soybean futures experienced similar movements as canola, with old-crop contracts easing while new-crop months climbed slightly higher.

The advancing soybean harvest in Brazil and Argentina helped to increase the oilseed supply on the world market. This jump in supply and China’s preference to purchase cheaper-priced South American soybeans helped to spark the declines in the old-crop soybean futures on the CBOT. Sentiment that old-crop soybean supplies are higher than what the U.S. Department of Agriculture is working with, also contributed to the bearish price atmosphere.

Speculative fund liquidation, sparked by another earthquake in Japan, also helped to weigh on old-crop CBOT soybean futures.

Dry growing conditions for the soybeans that have already been planted in the southern U.S., and concerns about the wet conditions that are plaguing the U.S. Midwest, provided some support for the new-crop months.

DWAYNE KLASSEN CNSC

Corn values at the CBOT climbed higher on the week as strong demand from the export and domestic sectors has left old-crop corn supplies at a bare minimum. Sentiment that new-crop corn area will not be enough to satisfy the demand picture, also fuelled some of the price advances.

Wheat futures at the CBOT saw some modest advances with a pickup in demand behind some of the strength. The recent sharp jump in U.S. corn values has caused the U.S. livestock industry to switch back to wheat as its key feed ingredient, which in turn has helped to prop up values.

Additional support in wheat also continued to come from the dry growing conditions in the U.S. winter wheat-producing areas and from concerns that the seeding of the U.S. spring wheat crop in the northern-tier U.S. states will also be significantly delayed by excessively wet conditions and flooding.

FEW CHANGES

As evidenced by the lack of market commentary, the USDA supply/demand report released April 8 was rather uneventful.

The government agency resisted making many changes to its previous forecast on corn, soybeans and wheat. Market participants had been anticipating downward revisions in both U.S. corn and soybean ending stock estimates. They didn’t get it.

Weather is definitely going to play a big role in which way canola as well as U.S. grain and soybean values go over the next month or so.

On the Canadian Prairies, producers in the drier areas of southern Alberta and in the southwestern corner of Saskatchewan would be already taking bets at the local coffee shops on who would be the first to get their crop in the ground. By the sound of it, there has not been a lot of that going on yet.

The weather outlooks are also not exactly promising either, with most forecasts expecting a wet spring to go along with the overly moist fall and heavy winter precipitation.

It’s true that a two-week window of warm temperatures and dry weather would allow most producers adequate time to get a crop planted well within the boundaries of normal growing time allotments. However, that’s now far from certain, and because of that, futures in Winnipeg will continue to slowly strengthen.

Statistics Canada will also release its first look at what producers plan on seeding this spring, in a report due out toward the end of April.

However, many individuals have already started to question the accuracy of the report, given that the survey was likely done at the start of April.

Market participants anticipate that producers may have pencilled out 18 million to 19 million acres of canola, but whether that much canola is actually seeded due to the weather is still very doubtful. Even if producers do manage to plant that much canola, the question then becomes: How late did the crop get in, and how vulnerable will it be to an early frost?

Dwayne Klassen and Brent Harder write for Commodity News Service Canada, a

Winnipeg company specializing in grain and commodity market reporting.

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