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Highlights

Situation report – November 2007

Canadian production estimates

Statistics Canada reported an increase in feed grain production in 2007 and a decline in the production of oilseeds in their final crop production estimates of the year. Overall grain quality was reported to be lower than in 2006 but still above average.  Spring wheat production fell, but remained above the five-year average.  Durum wheat output jumped 10% over 2006 with better than normal quality reported.  Although the provincial distribution was mixed, dry pea production rose as a result of a record harvested area. 

A record grain corn harvest was reported in eastern Canada.  The harvested area for corn was record or near-record in most areas, mainly at the expense of soybean area.  Challenging weather also reduced soybean yields. 

US world agricultural supply and demand estimates

On November 9th, the US Department of Agriculture projected US wheat ending stocks for 2007/2008 up 0.14 million tonnes, to 8.49 million.  The increase was a surprise for traders who were expecting a decline in carryout.  USDA also raised its forecast for global wheat production to 603.3 million tonnes, a 2.83 million tonne increase from the previous monthly estimate.  World wheat ending  stocks were estimated at 2.8 million tonnes, up from October but still the lowest in 30 years. Planting of the US winter wheat crop progressed in line with the five-year average.  However, the crop’s condition deteriorated over the month, a result of dry weather in the Plains.

USDA lowered US corn ending stocks by 2.72 million tonnes to 51.63 million tonnes, a result of a reduced production estimate.  The lower projected output is still the second highest on record after 2004.  World coarse grain ending stocks for 2007/2008 were nearly unchanged.

Contrary to traders’ expectations of increases in US soybean production, USDA lowered production 0.1 million tonnes to 70.61 million tonnes because of a lower yield.  US soybean ending stocks were also trimmed by 0.14 million, to 5.71 million tonnes.   

Record canola crushings

Canadian oilseed processors crushed a record 350,661 metric tonnes of canola in October, according to Statistics Canada’s monthly survey of crushing plants. Oil production in October totalled 144,620 tonnes while meal production amounted to 211,373 tonnes.  The previous monthly crush record was 332,352 metric tonnes in December 2006.  During the first three months of the 2007/2008 crop year 1,005,239 metric tonnes of canola seed were crushed, 12.7 % ahead of last year's pace and 31.6 % ahead of the ten-year average.

Canadian Wheat Board payments

The 2007/2008 Canadian Wheat Board initial payments were significantly increased on November 22 (see table 23). Interim payments were also announced for the 2006/2007 crop year.  The payments were $9 a tonne for durum wheat, $8 for designated barley and $53 for feed barley from Pool B.  There were no interim payments for wheat excluding durum. 

The CWB November Pool Return Outlook for 2007/2008 was $3 higher to $6 lower than October for milling wheat as a result of a stronger Canadian dollar and declines in world prices.  Milling durum PROs were $4 to $6 lower than October primarily because of the higher dollar.  Although demand softened slightly in November, the market remained tight and the CWB forecast a continuation of the high prices at least until the new crop is available in mid-2008.  PROs for two-row malting barley were $3 lower while six-row was unchanged.  Although demand was slow, designated barley prices were supported by quality concerns in Canada and Australia and frost in Argentina.  The first PRO for the Feed barley B pool was estimated at $245.  Western barley futures’ prices moved mostly sideways during November on weak near-term demand.

Prices

Chicago corn futures’ prices moved sideways most of November as the harvest advanced.  While there was little in USDA’s crop report to move corn prices, speculative buying and a strong soybean complex helped maintain price levels.

Oats futures’ were down over the month in thin trading.

After steep losses at the end of October and a bearish USDA crop report early in November, wheat futures’ prices finally rose in late November on weather concerns.  Dry weather in the US Plains and cold weather in Argentina as harvest approaches were worries. The market is sensitive to anything that might tighten already low stocks. 

The Chicago soybean complex remained strong with increases in both soybeans and soybean oil and meal.  Vegetable oil prices continued to be pushed higher by strong demand for soybeans and soybean oil from China.  USDA’s lower US soybean production estimate combined with good demand and strength from crude oil pushed soybean prices to near-record highs despite harvest progress.

The strength of the soybean market combined with a small decline in the Canadian dollar made canola values attractive to both domestic and export buyers.  However, canola prices still rose substantially over the month, pushed higher by spillover from the soybean complex.  Stocks in commercial positions were substantial compared to a year-earlier.

The pea market remained strong into late fall due to short supplies of quality peas and strong demand from Asian and Indian markets.  Green pea prices held steady as a result of limited supply while yellow pea prices increased to levels similar to one year ago.  Although yellow peas lagged slightly behind green peas, the price had been catching up with increased demand from India.  Feed pea prices decreased slightly as the fall season progressed, although average prices were still above those seen the past few years.  A bumper US corn crop helped to replace some peas as a source of protein in livestock feeds.  Higher demand for edible peas from Indian markets and feed peas from the EU limited the amount of peas available to the domestic feed market.  The high demand for edible and feed peas on the world market resulted in a modest increase in exports which is expected to be sustained throughout the 2007/2008 crop year.  As a result, domestic feed markets have had a harder time sourcing peas without increasing bids. 

Lentil prices maintained their strength throughout the fall season due to limited grower selling and a strong Canadian dollar in relation to the US dollar.  Also helping to sustain lentil prices was a lower world supply.

Kabuli chickpea prices rebounded after a slight market depression at the start of the fall season while desi chickpea prices held steady.  Markets were quiet as participants waited to see how the rabi, or winter, season pulse crops on the Indian subcontinent would develop.

Yellow mustard prices held steady at near historical levels.  Oriental and brown mustard prices continued to climb but still lagged behind that of yellow mustard.  A reduction in Canadian and European production estimates and the fact that most of the Canadian crop has already been contracted helped to sustain higher mustard prices. 

Prices for canary seed remained strong due to low carry-in stocks that have more than offset the increase in 2007/2008 production.

The spot price for confectionary sunflower seeds was relatively weak compared to the higher prices for other special crops.  This was due, in part, to the high Canadian dollar, but mostly to the fact that processors had been taking delivery of the sunflower seeds that they contracted earlier.  There was very little demand for cash sunflower seeds to-date.  Oil sunflower seed prices underwent some market correction after seeing higher prices at the beginning of the season.  A slowdown in purchases and increase in producer selling combined to push down oil sunflower prices, reducing the spread between sunflower oil, canola oil, and soybean oil.