Wittal: Grains ride upbeat economic news

Aug. 21 — My report is early today as I will be away this afternoon. Financial markets are showing solid gains today in response to economic news that seems to indicate the U.S. economy has hit bottom and is seeing glimmers of recovery.

Housing sales in July are up 7.2 per cent over last July, which is the largest increase seen in the last 10 years. U.S. Federal Reserve chairman Ben Bernanke today announced that the U.S. economy is on the verge of a long-awaited recovery. Improved conditions in the U.S. and European economies point to the start of a recovery happening slowly.

These news bits were enough to send financial markets off to the races this morning and that also helped set a positive tone for the grains early on as well. 

Statistics Canada’s acreage and production report, released this morning, was friendly to canola and barley and neutral to wheat. 

Canola production is estimated at 9.54 million tonnes, which is down 24 per cent from last year’s record crop and below the trade’s estimate of 10.4 million tonnes. This is still the third-largest crop of canola ever produced in Western Canada. These numbers were based as of July 31, so it does not take into consideration the recent hailstorms and the production losses estimated from those storms.

The key will be the U.S. bean crop and how big it will end up being, as well as the continued rise of the Canadian dollar which will impact on our export price competitiveness. 

Wheat production is predicted to be 23.61 million tonnes, which is down 17.5 per cent from last year’s bumper crop and is also higher than the trades estimate of 23 million tonnes. Add this to strong U.S. production estimates and large world carryout and we have a flat to down market for quite some time going forward.

Barley production is estimated to be 8.948 million tonnes, down 24 per cent from last year and pretty much in line with the trade’s estimate. Low feed demand and cheap U.S. grains coming into the southern feed market will continue to pressure feed barley values lower.

Oats are pegged at 2.967 million tonnes, down 30 per cent from last year and still above the trade’s estimate of 2.7 million tonnes. Surplus old-crop stocks and limited feed demand will keep oats on the bottom for a while longer. Export business is what is needed to recharge this market. 

As of 11 a.m. today:

  • The U.S. dollar is down almost a third of a cent. The Canadian dollar is up 0.56 cents at US92.42 cents, up 1.7 cents from last week’s close.
  • The Dow Jones September quote is up 154 points at 9,474, up 155 points over last week.
  • Crude oil is mixed with the nearby month, up $1.21 a barrel at US$74.12. Forward months are down $1.02-$1.16 per barrel, up $4.25 over last week.
  • Corn is currently trading unchanged at levels equal to last week’s close.
  • Beans are up 12-20 cents per bushel, down seven cents per bushel from last week’s close.
  • Wheat futures are even to down 11 cents per bushel on the various U.S. exchanges. Minneapolis September wheat futures are currently down 9.4 cents per bushel and 19 cents below last week’s close.
  • Canola is even to down $1.50 per tonne and $8 per tonne below last week’s close.
  • Barley is trading up 20 cents per tonne at $135, down $2.50 per tonne from last week.

Be safe in the fields as harvest starts in some parts of the Prairies. That’s all for his week. — Brian

— Brian Wittal has spent over 27 years in the grain industry, including as an elevator manager and producer services representative for Alberta Wheat Pool, a regional sales manager for AgPro Grain and farm business representative for the Canadian Wheat Board, where he he

lped design some of the new pricing programs. He also operates his own company providing marketing and risk management advice for Prairie grain producers. Brian’s daily commentaries focus on how domestic and world market conditions affect you directly as grain producers.

Brian welcomes feedback and information on market conditions in your area, such as current offering prices, basis levels, trucking premiums and special crops contracts. Contact Brian today.

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Brian Wittal

Brian Wittal has 30 years of grain industry experience and currently offers market planning and marketing advice to farmers through his company Pro Com Marketing Ltd.

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