Further increases are not expected for barley prices this year and the price of peas remains strong due to Chinese demand
Expect a small rally in wheat prices in the new year, says a market analyst.
The holidays will be a slow period but there should be some pricing opportunities early in 2020, MarketsFarm analyst Mike Jubinville told farmers attending the 2019 Farm Forum Event.
“Over the next two or three months, I can envision an opportunity that sees maybe another 50 cents a bushel added to this marketplace,” he said.
Spring wheat prices experienced a bump in September and October brought on by quality concerns with the North American crop, combined with rising Russian wheat prices.
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The delayed harvest caused Canadian grain companies to further improve the basis, and cash prices climbed to $6.50 to $7 per bu. for No. 1, 13.5 percent protein hard red spring wheat.
The market soon realized it had gone up too high, too fast and prices have fallen back to the point where Jubinville wouldn’t recommend pricing any wheat at today’s values.
But he thinks the wheat market will need to “reload” in early 2020. Prices in Russia and the European Union are once again starting to trend higher.
Bruce Burnett, another MarketsFarm analyst, said another bullish factor is Australia’s short crop.
The Australian government is forecasting 15.9 million tonnes of wheat production, eight percent below the previous year’s drought-damaged crop.
MarketsFarm believes production will be even lower at 14.5 million tonnes. It is forecasting a paltry six million tonnes of exports, down from the high of 24.7 million tonnes in 2011-12.
“That means the demand for Canadian grain in the Southeast Asian basin is going to be very, very strong, specifically for wheat,” he said.
Last year’s feed barley prices were terrific and the market was expecting a huge acreage response.
Canadian growers produced an estimated 10.4 million tonnes of the crop, a 24 percent increase over the previous year.
“The problem is a really unique circumstance this year where the barley is in the wrong position,” Jubinville said in an interview following his presentation.
Southern Alberta has had two short crops in a row and is having to pull in barley from other parts of the province and from Saskatchewan. But with trucking limitations it is like “moving grain through a garden hose.”
Cash barley prices have increased to $230 per tonne from about $200 a tonne, which is approaching feed wheat prices.
“I think the ceiling is in for the barley and I’ve been an aggressive seller because of it,” he said.
The good news is Canadian barley is still about $20 to $30 per tonne cheaper than imported U.S. corn.
Pea production is up after two years of decline. Statistics Canada is forecasting 4.2 million tonnes of production, an 18 percent jump over the previous year.
Prices are strong with bids in mid-Saskatchewan in the $6.75 to $7 range. That is because China remains a voracious buyer of the crop. It will likely import 1.75 to two million tonnes of Canadian peas in 2019-20.
However, China won’t be chasing the market because it can import Black Sea peas instead.
The wild card is India. If its winter crop is looking poor, the government may remove its punitive tariffs and quotas. If not, then $7 per bu. is probably a good selling opportunity.
“If we don’t have the two gorillas and we only have the one, I think we have limited upside,” said Jubinville.
Red lentils have been on a long downward slide from the highs of 40 to 50 cents per pound a few years ago.
But the crop is showing signs of life with prices rising to around 20 cents per lb. from a long period in the 16 to 18 cents range.
“This may be the time we break through,” said Jubinville.
Global supply has contracted.
The market has finally become comfortable with the new hand-to-mouth trading reality.
And Canadian lentils have been making their way to India despite the import tariffs. Volumes could jump dramatically if India has a poor winter crop.
“I think we’ve turned the corner on lentils,” he said.
“I’m encouraged.”
Jubinville stressed that he’s not “crazy bullish” but he thinks prices will grind higher in the second half of 2019-20.
Oat values have held up well with good pricing opportunities of $3.25 to $3.50 per bu. in Saskatchewan and $4 to $4.25 in southern Manitoba.
“I’ve been a pretty aggressive seller on it because I think these are good prices,” he said.
Canadian farmers produced 4.16 million tonnes of oats, according to Statistics Canada. That should be enough to satisfy North American demand but there are some concerns about quality.
