Canola, wheat markets face different dynamics

Confirmation last week of tight canola stocks in Canada helped to support the price of that crop, but even a punishing snowstorm in the heart of the U.S. winter wheat area couldn’t lift that crop’s price.

Statistics Canada said 6.6 million tonnes of canola were on hand March 31, down 23 percent from last year at the same time and a four-year low.

The number was slightly lower than the mid-point of the range of analyst’s expectations.

The report helped nudge old crop July canola, which had been rallying since early April on expectations that the rapid pace of exports and domestic crush would drive down stocks as we moved into the final quarter of the crop year.

The amount of canola carried into the next crop year will likely be small, making it all the more important to harvest a big crop later this summer.

However, farmers are concerned that the pace of seeding is slow because of damp weather in many areas. That is helping to drive November canola prices higher.

The Statistics Canada report confirmed lots of grain are around. It pegged Canadian all wheat stocks at 16.6 million tonnes, durum at 4.1 million and barley at 4.6 million. All were above last year’s number, but the durum number was less than expected, and that was a bright spot.

The report had little impact on grain prices because that segment of the market was focused on U.S. issues.

Last week, wheat futures jumped higher early, supported by the idea that a spring blizzard had harmed hard red winter wheat in Kansas and Nebraska.

But as we report on page 7 this week, a scouting tour of Kansas in the days following the report found above average yield potential in areas where the crop was not flattened by the snow.

The Wheat Quality Council’s forecast for 282 million bushels, or about 7.7 million tonnes, is more tentative than usual because it is impossible at this point to know how many acres will be able to be harvested.

The tour’s forecast is down five million tonnes, or 40 percent, from the bin-busting record production of 12.7 million tonnes last year.

The market expects less U.S. winter wheat this year. The total winter wheat planted area is down nine percent, and in Kansas, which is the biggest hard red winter producer, acreage is down 12 percent.

However, the potential of production being down even a little more is apparently not enough to generate a sustainable rally.

By the time traders went home for the weekend, the Kansas hard red winter wheat contract was trading almost where it was before the big blizzard.

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