New crop markets | Drought in Turkey may send durum prices up, but high barley carry-out stocks will keep prices down
REGINA — Farmers shouldn’t get too optimistic about new crop prices, a breakfast meeting at Canada’s Farm Progress Show was told last week.
“I know a lot of you are looking for opportunities to deal with your current inventories,” said Bruce Burnett of the CWB.
Burnett didn’t mince words when it came to old crop stocks. Sell them on any rally to reduce carry-out stocks. Sell for cash flow or because of a lack of storage, based on needs for the new crop.
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He recommended storing the new crop while prices are low during the fall. However, prices will likely improve in the first and second quarters of next year.
Burnett said prices for canola and most wheat were unlikely to improve through the summer, and producers should be prepared to sell on any rally.
Global crops look good and are weighing down the market.
The European Union started the season dry, but good to excessive rainfalls have left the cereal crop in excellent condition.
Drought in the U.S. southern Plains won’t make up for the big EU harvest and might act as a spoiler for Canadian protein premiums. Early samples from the U.S. hard red winter wheat crop show unusually high protein levels because the crop was short of moisture.
Australia also has a good to excellent crop on the way, unless an El Nino sets in and the growing season rains fail.
However, that means a currently projected 25 million tonne crop might drop to 22 million tonnes, “but no lower than that,” he said.
Brazil and Argentina have good cereal crops on the way. Brazil had been importing Canadian wheat, but that market is now drying up as it turns to improved regional supplies.
The market news is better for durum producers. The price will likely go higher, and demand should be strong.
Northeastern Turkey has experienced drought, which will cut into its durum production.
However, it could still export because unstable governments and civil war in Syria and Iraq are creating attractive regional export opportunities. Turkey will likely backfill the exports with imports, likely from Canada.
Parts of Italy and Spain will not have high yielding durum because of regional droughts, and Italy is already seeking supply.
Canadian durum stocks at the end of the current crop year are expected at two million tonnes, and are forecast to drop to 1.6 million at the end of 2014-15.
“There is nothing wrong with that,” he said .
Durum acreage this spring was expected to be 4.78 million acres, which was down marginally from 2013-14.
Burnett said oat stocks should be sold now. A lot went into the ground and the potential for logistical issues again next crop year won’t help deliveries, even if prices at the user end rally.
Despite recent strength in cattle and pig prices, barley growers should recognize that the 2.6 million tonne carry-out is not a good situation and a projected two million tonne surplus for 2014-15 will not support price increases.
Nearly one million fewer acres of barley were planted this year than the average, But that is still more than what livestock herds can consume, Burnett said.
Flax acres jumped this spring, but he said the acceptance of Canadian product into the European Union again and a growing market in the U.S. should consume most of that production, keeping new crop prices solid.
