Manitoba Agriculture, Food and Rural Initiatives

Grains and Oilseeds Commentary

July 29, 2010

Despite ongoing weather problems in Western Canada, Statistics Canada reports another record production year for the global wheat supply. Growing conditions remain good to excellent in the United States, the European Union, Ukraine, Russia, Argentina and Australia. According to the CWB, weather-related problems in world wheat production are needed to make the market more bullish. In the CWB’s updated PRO for the 2010/2011 crop year, wheat values ranged from an increase of $6 per tonne to a decrease of $1 per tonne for all grades and classes. Durum wheat, malt barley and feed barley values were all unchanged.

Winnipeg canola futures were supported by planting delays and concerns about damage to canola crops from excess moisture throughout the month. Steady crusher demand and pricing of old export business also helped to underpin prices. Producers were reluctant to deliver into the cash market as weather problems continued. Gains were limited by a strong Canadian dollar and lack of fresh export demand. By the end of the month, exporters and domestic crushers were starting to show some reluctance to buy at higher levels.

Chicago soybeans were also influenced by weather concerns as the month started out with record high crop ratings and ideal near-term weather. By mid-June, continued rains brought worries of delays in US soybean plantings and of threats to the quality of young plants. Spill over support was also felt from concerns about the Canadian canola crop. The tight availability of nearby supplies as producers were reluctant sellers and fresh demand news also supported prices. Outside markets added strength to the market as the US dollar and equities and energy markets all weakened as the month progressed.

Wheat futures continued to struggle from a lack of supportive news. Weighing on prices were the advancing United States winter wheat crop, large United States and global wheat supplies and slow export demand. By the middle of June, concerns about Canada’s production potential seeped into the markets. Hard red spring wheat prices on the Minneapolis Grain Exchange (MGE) found some support from the potential weather risks to the developing spring wheat and talk of planting delays in Western Canada.

Chicago Board of Trade (CBOT) corn futures’ prices were pressured downward by excellent central United States growing conditions and improved crop ratings. Underpinning prices were good export demand and, growing ethanol usage and demand. Prices were supported early in the month when the USDA reduced ending stock projections for the crop year. The sinking US dollar and broad based commodity grains also added strength to the market. Renewed demand from China sparked a rally in prices. Dry conditions in the east-central corn growing region of China encouraged traders to add a risk premium into the market. There was speculation that China may need to import additional US corn supplies to cover any domestic shortfalls. A potential shift in US Midwest weather patterns created some worry late in the month. Some areas were starting to get too much moisture while other areas of the corn belt faced lingering hot, dry weather. Traders continued to monitor the situation, although some felt that the weather problems were only isolated to small areas of the region.

Weather problems in Western Canada spread into special crop markets, lending support to prices. Upward movement in dry pea prices was limited because of expectations for record large ending stocks for the 2009/2010 crop year. Lentils saw more price strength as international markets resigned themselves to the idea that Canadian farmers would not plant as many acres of lentils as initially intended. Processors also worried that crop development would be affected by the excess moisture, and that there may be a greater than normal risk of disease problems, heat during flowering, and adverse weather during harvest.