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A Look Ahead To 2010

“I have a number of customers for pea exports and there’s virtually no harvest demand to speak of from any country.”

If you haven’t noticed, grain movement has been very slow this fall. It could be that many acres are still out in the field — mainly canola — and producers simply want to have harvest finished before they start delivering. Or it could be that feed grain and oilseed prices are just lower than expected and producers are unwilling sellers. What does the future hold? What sort of information should be pondered for future price consideration? Here are my thoughts on canola, feed barley, oats and peas.

CANOLA

As of mid-October, a lot of canola is still in the field. StatsCan’s October report estimated Canadian canola production down by 19 per cent, so the trade will be watching harvest progression intently.

The biggest fundamental important to canola is the U. S. soybean crop. Norm Czibere, grain manager with Bunge Canada, says “everything there is delayed and quality might be an issue. If the U. S. does get the soybean crop off, it will be the largest ever. If not, we could see some strength in our own canola prices.” He added that basis levels have been unusually narrow for fall deliveries. “My gut feels basis will widen BUT if China and India decide to buy, basis could remain historically narrow,” he says.

Another issue for canola is to watch the bins as quality could be suspect. The Bunge grain manager has already seen samples of heated canola come into the Fort Saskatchewan crushing plant. “The 30 weather in September and a variety of stages in some fields are the biggest culprits this year for heated canola. A good safeguard would be to turn your canola or at least check it often. Heated canola equals a wide basis. Check your bins!” he exclaimed.

Finally, remember Canada is an exporting country. So, typically, a higher Canadian dollar does not bode well for most commodities

we export.

FEED BARLEY

Feed barley has seen another huge price drop since July 2008 when producers had the opportunity to lock-in fall feed barley just a few months down the road for well over $5.50 per bushel into Lethbridge. One season later and feed prices are in the $3.30 range, delivered to the same destination.

Barley acres are down this year as they were traded off, in most cases, for wheat. Barley yields are lower and the protein higher — mostly due to tumultuous weather conditions. Countering that are fewer cattle on feed, reduced hog numbers, increased dried distillers’ decrease of approximately 40 per cent. Some acres originally intended for the higher quality oat markets got taken off for green feed, some were written off, and some still remain unharvested, which leads to a quality issue. On the other hand, many bins filled with last year’s crop have not moved, yet.

Vince Bokenfohr, senior merchant of specialty oats with Viterra, says producers should consider a few key areas when contemplating premium oat markets in the future. “There seems to be interest from the funds investing in commodities again and that would drive the oat futures upwards without any real fundamental basis. Do not get

—CHRIS CHIVILO

grain and corn being imported (our higher dollar makes imports cheaper) to alleviate feed costs, and increased numbers of malt barley turning to the feed market as protein levels surge well above 13 per cent. Demand is down so reduced acres and yield might be a blessing in disguise.

OATS

This past year has been the slowest for producer movement I’ve ever seen in our office for good quality oats, whether for milling or pony markets. Ever since July 2008 or so, prices have declined from $4 per bushel at the bin and have not stopped dropping — until recently. Bids for No. 2 or better oats that dove below the $2 mark have just recently experienced resurgence. Spot pricing is above $2 at the bin in most areas, and we’re seeing very stable bids for new crop — yes, new crop 2010 — over the $2.70 mark delivered to various points.

Our estimates for oat acres this year in Alberta showed a fooled by this as buyers will simply widen basis levels to achieve the price that is fundamentally accurate. Also, we must consider that there is a big carryout from last year and our end users already have ample supply for now. April forward could generate some buying interest.”

Bokenfohr is also watching the remaining oat crop out in the field. “There could be some quality issues. In that case, we’d see a bigger discrepancy between feed and milling oats or pony oats.” He cautions producers not to get stuck with unmarketed oats. He recently spoke with one grower who has 1,700 tonnes of oats on the farm and reminds all producers there’s a limitation to what individual mills or buyers can accommodate at one time, or even during a time period.

Bokenfohr adds that Canada is not the only oat supplier in the world. “The Australian harvest is coming off in some areas and should be in full swing three to four weeks from now.

A Look AhEAd To 2010

If Canadian oats are continually shown to Japanese buyers at inflated levels, Japan might just go to Australia and we could lose market share. Scandinavian oats just got sold into the southeastern U. S. and that affects our racehorse market. Even oat groat sales into Mexico are slimmer than usual because they simply can’t afford it.” This senior oats merchant says an “average your prices up” strategy is always a good one.

PEAS

After a number of crop years where human consumption — also referred to as No. 2 edible — pea prices displayed an increase after harvest, today producers have been disappointed to discover prices substantially less than earlier in the harvest. Initial bids gave the pea producer $8.00 per bushel at the bin for No. 2 greens with less than three per cent bleach and $7.00 for No. 2 yellows. Anyone delivering edible peas today will find levels at $7.00 and $5.00 respectively. In fact, a producer should put pen to paper and compare feed prices against No. 2 yellows. The feed price might in fact net more dollars.

So, what’s the outlook for the best ingredient in ham and pea soup? Chris Chivilo, owner of W. A. Grain and Pulse Solutions, has been in the pea export business for some time and even he finds the pea industry quiet. “I have a number of customers for pea exports and there’s virtually no harvest demand to speak of from any country. The Indian government is reducing their own internal stocks because companies were hoarding supplies to drive up local prices, which accounted for a three-month supply of pulses. That’s the biggest reason we’re slow here in Alberta. When the stocks in India become manageable, prices should reverse, perhaps in a few months.”

China hasn’t really been in the market for a year, since the crash, Chivilo adds. As to the future of pea prices, Chivilo anticipates some good and bad news for producers. “I don’t anticipate No. 2 yellows rebounding as much as the greens. It’s fairly easy to obtain a human consumption yellow pea compared to the green varieties. Edible greens with nominal bleach should really turn around due to lack of supply of the good quality. I’ll be excited when India (and China) comes back into the market.

CONCLUSION

No matter what predictions actually turn out to be, the first strategy a grower should employ is a detailed cost of production. That will help you realize what price makes a profit for your farm. Some producers were in the unfortunate position over the past year to incorporate higher inputs. Now, along with reduced yields and reduced prices, the breakeven price point is even more important to nail down. Hindsight is a wonderful thing. Last crop year looks like a dream.

Shelley Wetmore is owner of Market Master, a feedgrain brokerage and consulting service based in Edmonton. You can reach her toll free at 1-800-440-8390 or visit www.grain-watchdog.com.

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