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A Great Winter For Peas

We had a great winter in the pea market — good prices and easy movement. Peas were pouring out of Canada, mainly to Chinese starch fractionation plants. That strong movement started easing off in March and the slowdown doesn’t appear to be finished. Yellows were fetching $9 per bushel on February but you’ll only find $7.50 to $7.75 today, if, in fact, your buyer is even buying. Some do not have a bid. You might find an elevator bid at $8.
 
Chinese demand is fully bought up and thousands of tons of peas still are en route. As is typical in a falling market, a few importers are finding reasons to cancel contracts signed at higher levels than are available to them now.
 
Greens still trade at a premium to yellows. You can probably get $8.25 per bushel for greens. These values have also fallen hard since March. Greens, give the market credit, are maintaining a premium. The price of yellows has been a floor for greens all winter, because fractionation plants don’t care about color, but greens still aren’t hitting that floor.
 
The yellow crop was 2.7 million metric tons and almost all of that will be gone by July. Green production was 700,000 metric tons and, while most will move, there will still be a carryover at the end of July.
 
One change in pea exports is that more are moving in bulk, as opposed to by container. This is narrowing the cost of transportation, although probably not be enough that you would notice.
 
The short-term outlook for peas is soft. The saving grace is that few farmers are hauling now.
 
The outlook for peas for 2015 is positive. Statistics Canada reports western Canadian seeding intentions up only 1 percent. Given the strong market, an increase that small seems unlikely but that’s what farmers reported. By the end of the crop year, we’ll be sold out of yellows and the green carryover will probably be less than 100,000 metric tons, so there’s lots of room for more production.
 
New-crop yellow bids are available at $6.75 per bushel freight on board farm. Green bids are about $8 per bushel. Green demand is generally steady, year-to-year.
 
Canola stocks tighten
 
Canola fundamentals are tightening for old crop and also for 2015 to ’16.
 
The crop year-to-date crush pace and export program continue to exceed year-ago levels by a combined total of 650,000 metric tons. We anticipate ending stocks to finish at 1.3 million metric tons, down from 2.3 million metric tons last year and down from the five-year average of 1.7 million metric tons. Despite the lower ending stocks, the July to November futures spread has moved from a $15 inverse down to a $5 inverse, reflecting softer export demand in the final quarter of the crop year.
 
Canadian canola acres for 2015 are projected to be down 4.5 percent from last year at 19.416 million acres. Given the potential for lower acreage coming off a tighter carryout, the market will be extremely sensitive to weather and yield developments during the growing season. Canada cannot afford to have a crop problem or stocks become extremely tight. There is potential for the market to incorporate a risk premium because of the uncertainty in production during the summer.
 
Barley acres increase
 
Lethbridge, Alberta, feedlots were buying barley at $216 to $220 last week.
 
The market feels firm because of lower farmer selling and seasonally strong domestic feedlot demand. We project the Canadian barley carryout to finish near 900,000 million metric tons for 2014 to ’15, which is down from 1.9 million metric tons in 2013 to ’14 and down from the 10-year average of 2.1 million. Domestic demand eases in the summer, but the overall tighter stocks should limit the downside.
 
Canadian farmers intend to increase barley acres by 10.2 percent this spring.
 
Despite the increase in production, barley stocks will remain historically tight in 2015 to ’16, and similar to canola, the market cannot afford to have a crop problem. In the past year, a fair amount of wheat was used in feedlot rations because of the adverse harvest conditions last fall.
 
But this year, the wheat and barley crops will be seeded in a timely fashion, limiting the amount of feed wheat available.
 
Source : agweek

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