Wheat looks sweet, but 2015-16 canola prices should be “flat, at best,” says analyst Chuck Penner.
That’s despite canola’s supply and demand situation being relatively good compared to soybeans.
“I think we have about $50 to $100 relative gain in the market (compared to soybean futures), but if we see soybean futures drop by two bucks (per bushel), that kind of wipes out that,” Penner said in an outlook presentation at the Western Canadian Wheat Growers Association annual convention.
“You could (have canola) gain $2 relative to soybeans, but soybeans drop $2 and canola prices end up where they are now.”
Other analysts might be down on wheat, but Penner is more optimistic because he thinks wheat stocks aren’t burdensome and demand is good.
Penner thinks wheat prices should be flat to a bit better for the rest of this crop year, and damage to vulnerable U.S. and Russian winter wheat crops would create a bullish situation.
As well, things should be better still next year.
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“I’m actually calling for some good upside potential in the coming year for wheat,” Penner said.
The same goes for durum, with bullish possibilities later in this crop year as processors, who are now covered for a couple of months, move to secure more supplies.
Farmers around the world don’t seem to want to grow durum much anymore, which Penner said “is a good opportunity, friendly, for us.”
Chinese demand is behind the firm barley prices in Western Canada, he added. The price here would be weaker if China wasn’t sweeping malt and feed barley off of world markets.
Penner thinks canola prices could end up flat, regardless of bullish fundamentals, because soybeans have rebuilt large stocks around the world. As well, more huge crops are likely coming in South America and the U.S., and canola can’t independently push the oilseeds complex higher.
