Market Insider

A Lower-Level Game

Basis levels across Western Canada continue to tighten with the Canadian dollar shooting back above 73 cents thanks to weakness in the United States dollar experiencing its worst one-week loss since 2009! This week we also got Statistics Canada report for December grain and oilseed stocks, resetting some of the goalposts for the supply and demand table game, but ultimately showing lower numbers with the decline attributed to exports. 

The winner for the biggest change year-over-year in Canadian grain stocks goes to the lentil sector at 1.68 million tonnes, a 47 per cent decline over December 31st, 2014 and over 48 per cent lower than the five year average (the better question is how much of this tonnage is already contracted!?!) On-farm stocks of Canadian lentils was where most of the decline was seen with just 720,000 tonnes available (less than half of the 2014 and five year average on-farm stocks), a number I would also contest as to how much is contracted!?! Peas, the other major export pulse crop saw a 2.7 per cent decline year-over-year to 2.165 million tonnes with almost all of the difference being attributed to a 22 per cent decline  recognized by commercial inventories (-23 per cent from December 2014 and -42.5 per cent from the five year average).

At the opposite end of the spectrum, Canadian flax stocks at the end of 2015 are up 24 per cent from the end of the 2014 at 732,000 metric tonnes, and 52 per cent above the five year average (no wonder bids are sitting around the $12/bushel handle). It is clear that more of the oilseed is being held by farmers because on-farm stocks are up 30 per cent year-over-year and +60 per cent from the five year average. The other big swing to the opposite end of things was corn, with stocks up 17 per cent year-over year and 11.5 per cent from the five year average at 11.36 million tonnes.

For the big names, total Canadian wheat stocks are down 19.3 per cent from 2014 to 20.7 million tonnes (-11.7 per cent from the five year average) while durum stocks actually increased by 3 per cent year-over-year (and unchanged from the five year average) at 4.23 million tonnes. For canola, inventories as of the end of December were roughly 4 per cent below the end of 2014 but almost 14 per cent higher than the five year average with 12.1 million tonnes still sitting on the farm and in commercial silos. Rounding out the complex is oats at 2.55 million tonnes (basically unchanged from 2014 but 5.2 per cent higher than the five year average), soybeans at 3.35 million tonnes (+1 per cent year over year, +19.9 per cent from the five year average), 5.7 million tonnes of barley (+4.1 per cent, -2.2 per cent), and 135,000 MT of rye (+17 per cent, +11.5 per cent).

From a cash perspective and per the grain price, wheat prices in Canada are set to drop more than two per cent for the second straight week. Prices for Hard Red Spring wheat on the spot market in the eastern half of the Prairies have dipped below $5/bushel while mid $6’s are still available for most deferred delivery periods. Notable losses continue to be seen in the durum wheat market whereas pea prices continue to be resilient in the double digits. Ultimately, the majority of losses on the cash side of things can be directly attributed to the Canadian dollar’s appreciation this week. While the calls for a 60 cent dollar are quieter now, we can’t completely disregard its possibility, but above 70 cents is where the game is likely to be played for the next few weeks.

To growth,

Brennan Turner
President & CEO |