Weekly Futures Tracker

2023 Report Schedule – Important Dates – Click Here For Report Release Schedule

Market Overview

• United States Federal Reserve raises interest rates once again yesterday, February 1st. 0.25% rate hike
  • Signals that there will be more rate hikes yet to come.
  • Noted that they are diverging from the forward projections of the Bank of Canada, who stated late in January that they will look to stop rate hikes before end of the year.
  • US Federal Reserve stated that it believed that disinflationary process is in the early stages as supply chain issues begin to ease. Inflation is still to high and will stay course with its current plan until 2% inflation is realized.
• Grain Markets traded on both sides this week.
  • Canola futures bounced off of resistance late last week and traded around the $790 level before finding some strength and gaining about $40 per tonne off of lows.
  • Spring Wheat having some upside as well, early last week it touched a low of $8.85 per bushel, up about $0.40 per bushel since then.  Spring wheat futures on its 8th straight days of trading higher
• Markets focusing on few key stories
  • South American rain forecasts
    • This is a double edges sword.  Corn markets watching how late the Safrinha (Second Crop) corn will be planted.  Some major rains in Brazil are slowing soybean harvest and therefore affecting soy harvest and corn planting.
    • The rains slowing harvest in Brazil are benefiting soy crops in Argentina. The South American geography is so vast that there are soybeans in Brazil being harvested and regions in Argentina that have just been planted.  So rains mean different things to crops, depending on their stage.
    • Markets watching forecasts like a hawk and rainy forecasts about 2 weeks ago were the catalyst for sending soy and other grains lower, before finding a short term bottom.
• Next week, China and Australia set to have first friendly trade meeting since shutting out Barley and other products in 2020.
  • Canadian traders closely watching to see if trade relations improve.
• US Soy Crush numbers were released for the month of December, yesterday.
  • Numbers came in at 187.4 million bushels, compared to 189.5 million bushels in November.
  • Soybean oil stocks at the end of December were reported at 2.3 billion pounds, well above market expectations as well.
• USDA put winter wheat acres in the United States at an 8 year high.  Winter wheat acres up 11% year over year.
  • • Of this, 15% remains in a region of exceptional drought vs only 2% last year.
    • The major question is how bad of a shape this wheat is in.  We will begin to see how emergence takes place beginning in April when producers get ready for the spring campaign.
  • Canadian wheat global prices FOB sit around middle of the pack at $367 USD per tonne, Russia remains the cheapest wheat globally by about $55 per tonne less at $311 per tonne.
  • Russia is dominating the global market and Canadian wheat just does not price in well to many nations.
• Rosario Grain Exchange out of Argentina put that nations Soybean crop at 37 mmt, substantially less than the USDA’s estimate of 45.5 mmt.
  • It placed the corn crop at 45 mmt vs 52 mmt with the USDA.
• Major reports to keep your eye out for next week
  • STATISTICS CANADA – STOCKS OF PRINCIPAL FIELD CROPS – FEBRUARY 7th
  • BRAZILIAN CONAB – FEBRUARY 8th
  • USDA WASDE – FEBRUARY 8th
• Most news affecting western Canadian markets is coming from other geographies.
  • • Canadian crop export pace about halfway through the marketing year is faring much better than last year.  Although it is important to recall that last year was a “Drought Year”
    • Compared to two years ago:
      • Wheat shipments at 9.5 mmt this year vs 9.8 mmt 2 years ago
      • Oat exports at 696,900 tonnes vs 1.080 mmt 2 years ago
      • Barley exports at 1.6 mmt vs 1.93 mmt 2 years ago
      • Canola at 4.115 mmt vs 5.940 mmt
      • Peas 1.076 mmt vs 1.623 mmt
      • Lentil 790,000 vs 528,000
• Canola crushers in Western Canada pulling back bids for the coming months and filling up delivery periods for Feb and March.
  • Canola total usage not as high as years before, see chart below.
• News Items of Note in the Marketplace
  • 2023 crop acres:
    • • Locally, producers are planning out 2023 crops and there could be some major acreage shifts for 2023.
      • it is more important than ever to understand your costs heading into 2023.  Some crops pencil out much better for 2023 than others.  Work with advisors to understand your ROI potential for each crop.
    • US producers also sitting in the same boat. The great debate of Corn vs Soybeans in rotations has been a hot topic lately. Crop production costs are very high.
      • Costs for producing corn in Illinois have jumped from $577 per acre in 2020 to $860 for 2023, a 49% increase.
      • Many private estimates start to be released in mid to late February but the official USDA Prospective Plantings report is set to be released on March 31st 2023.
• New Chickpea and Lentil Recommendations this Week. Check out the Recommendation tab for all current Grain Marketing Recommendations.

Prime Rate History – Chartered Banks Canada

Canola 6 Month Chart –

50 Day Moving Average – 100 Day Moving Average (Yellow) – 18 Day Moving Average (Red)

CANOLA CASH BIDS – CENTRAL PRAIRIES

Spring Wheat 6 Month Chart

50 Day Moving Average – 100 Day Moving Average (Yellow) – 18 Day Moving Average (Red)

Spring Wheat Cash Bids – Central Prairies

Spring Wheat

$9.26/Bushel – Up $0.08 USD / Bushel Past Five Trading Days 

• Spring Wheat prices 8 day rally has been welcomed and has moved north of some key Moving averages.
  • Spring wheat values have been trading about a $0.35 range since early December.
• Western Canadian wheat prices keeping fairly steady. Some of the futures volatility has been able to be mitigated by basis. Canadian wheat not pricing itself well into global markets as we are more expensive than Russian wheat, which is nothing new, even prior to war times.
  • Canadian wheat sells itself based off of quality.  Russian wheat is typically of lower quality but producers have an abundance of the crop. It is sometimes hard to compare FOB bids as wheat comes with so many different characteristics.
  • According to the USDA, Global Wheat Stock to Usage will come in tighter for 2022 crop year although Production is up slightly year over year. See charts below.
• 93% of all western Canadian HRSW graded as either a #1 or #2 wheat this year.
  • 79.3% hit the #1 slot, 13.6% hit the #2 slot.  1.6% came in as a #3 and the remainder was taken up by lower quality. (Grains Canada)
  • Russia produced a massive record sized wheat crop of over 100mmt, upwards of 20mmt above average.
    • Russia’s main concern is shipping this crop out, despite the games they try to play with the grain export corridor.
  • Global demand is always a underlying tone in markets for overall commodity demand.
    • How much consumption will actually take place?
    • China is expected to be overtaken by India in terms of total population by the end of 2023 at the latest.
  • US extreme cold in late December may put a few winter wheat acres at risk. How will this crop come out of Dormancy?
  • Australia has a 36.6 mmt crop coming in. 1% larger than last years record crop.
  • Russian and Ukrainian grain will continue to ship unencumbered through mid March due to the safe passage corridor extension.
  • Argentina drought devastating wheat crops. Set to put out the smallest crop in 7 years. 40% smaller than last years crop size.
  • Ukraine winter wheat planting fell by 40% as well due to major issues with planting a crop during war.

SPECIAL CROP

• India’s pulse crop appear to be in fair shape, some regions need rain but the rabi crop looks fairly good so far. Seeded area of Red Lentils estimated to be at near record levels
• Ukraine now shipping upwards of half of grain via road and rail to help with Black Sea issues.
• Markets expecting a large drop in 2023 flax acreage for Canada.
  • This may be the story for a few crops heading into 2023.  There will be some clear winners and losers for acreage.  Last year there were tremendous margins in a variety of crops.
• Red lentil values in India and Pakistan softening.
  • US Red Lentil crop estimated at 249,000 tonnes last year, a 61% increase year over year.
• Canadian Durum quality considered good for 2022 crop year. 82% grading as either a #1 or a #2
  • 62% as a #1 and 20% as a #2
  • #1 came in at 14.3% protein and #2 came in as 15% protein.
• Oat production surpassed 5 mmt according to Statistics Canada. Carryout’s Could Exceed a heavy 1MMT depending on export pace. Bids are very quiet.
  • USDA Oat stocks came in at 53.6 million bushels…. The lowest level since 2013.
  • US Oat carryout expected to be very tight.
  • Prairie oat prices at a large discount to US values
• Canadian producers just can not compete with Kazakh or Russian flax in the global marketplace.  Canadian flax down to $18 to $20 per bushel range.  Will have a tough time making upwards momentum if other main supplier keep market well supplied.
• Russia becomes the worlds largest pea producer, taking away the title from Canada
• US mustard crop expected to have came in much larger than last year, reducing import requirements.
• EU imports of Canadian mustard lower for the crop year. Higher volumes coming from Russia and Ukraine.
• Argentine export pace of Canary seed remain strong
• Canadian mustard supplies up year over year, hesitant selling from producers is keeping product from the marketplace and keeping bids supported.
• The combination of Australian and Canadian red lentil crop size will be third largest on record.
• Flax prices into Euro regions remain subdued and limiting Canadian crop markets

CANOLA

$828.00 / Metric Tonne – Up $21.90 / Tonne – Past 5 Trading Days

Canola trading higher for the week after some major down days pushing the March contract into the $790 range before rebounding earlier in the week.

Total usage of Canola in Canada for domestic usage and exports, although higher than last year, is much lower than the past five years. (See Chart Below) Lower carry in stocks is part to do with the lower consumption as no new crop was available until early September.

In January’s WASDE report the USDA put out a 10.5 MMT canola crush number for the crop year, which is inline with our estimates of essentially full crush capacity.  7.9 mmt exports, which is in line with most private estimates as well.  These figures leave us with a 1.6 mmt carryout.  This carryout is not considered to be razor thin, but yet not abundant. Last years carryout was estimated at 875,000 MT by the USDA.

Canola’s trading range had been in question last week.  Canola had previously been playing with the $860 level on the March futures since about the first week of December but shifted towards the lower end of the range last week.  Canola appears to have maintained key support levels but continuous technical and fundamental analysis is being conducted. Canola is trading heavily on outside news during this time of year,  South American weather, Palm Oil, Soy Oil all heavily influencing the crop.

Good portion of crushers are beginning to fill up their front months and weakening basis values. Crush margins remain strong and they have every incentive to run a full crush program for the year but we need to remember that the crushers can do max 10.5 mmt. We need to find a home for the remainder of the crop.

Very important to understand where you sit on your marketing plan and when you want to move your crop.

Crushers have dominated the year so far vs exporters. November crush came in at 877,500 tonnes of Canola

It appears China and Aussie relations are improving as China mulls opening its borders to some imports from Australia after some bans were put in place in the earlier days of COVID-19.

CANADIAN DOLLAR

January’s Inflation release date for the month prior came in at 6.3%. Down from 6.8% in November. Most of the drop was related to lower fuel prices.

The Bank of Canada increased overnight borrowing rates for interest rates in the January announcement.

Prime rate at most national banks sit near 6.7% now.

Weather – WPC 5-7 Days Forecast

Canadian Soil Moisture 

PRICES ARE IN UNITED STATES DOLLARS. PRICES ARE ALSO FOB US GULF COAST FOR BOTH PHOSPHATE AND UREA.  SO NEED TO FACTOR IN THE FOLLOWING: CURRENCY, FREIGHT, MARGIN

It is also important to note that these are not highly liquid markets(Fertilizer). They are meant to provide a price direction indication rather than a firm price.  Need to factor in the above variables.