Western Canadian Feed Grains and Canola Market Specialists

Market Report

September 10, 2004

 

Heavy technical selling, rumors of China walking on canola contracts average demand and the forecast for large world soybean crop have taken a big chunk out of the weather rally canola experienced after the August frost. The talk of Chinese canola cancellation so far is just talk.

Western Canadian harvest is non existent compared to what we have experienced over the last 5 years. While there is no doubt canola yields will be impacted by the poor weather we have experienced this year. Until the Canadian harvest gets into high gear not to many are comfortable forecasting crop size.

At the beginning of August private forecasts was for canola production in Western Canada was over 8 MMT. We feel this years canola output will be closer to 6.75 MMT. Until the harvest is complete we expect futures to trade on more of a technical basis.

Digging a little deeper into the USDA numbers today there is a little friendly news to support canola. USDA is forecasting average soyoil price from 25.0 cents per lb. This is lower then last years price of 30.0 cents per pound. It is however above the 2002/03 US average of 22.04 cents/lb. World veg oil stocks are forecasted smaller with total demand for veg oil up 9% over 2002-03. Depending on the Canadian dollar and what kind of export demand canola can get this year canola values are to low.

USDA report today was bearish for wheat and corn and friendly for soybeans. The friendly soybean numbers however is flying in the face of early harvest yield numbers which for corn and beans is running at record levels. If current weather conditions in the US can hold expect the US corn and soybean crop to continue getting bigger.

Current weather conditions are boosting short term cash prices for canola, feed wheat and feed barley. Low carryout from last year and slow harvest has dry feed grains and canola in short supply. CGC numbers this week are both positive and negative for canola. Canola stocks in all positions is 187 thousand compared to last years level of 678 thousand tonne. This does explain the good basis levels we are seeing for canola right now. Exports however showed up as 0 last week.

 

Larry Helfrich

Alternative Grain Marketing