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Market Focus – Feed grain market stabilizes at lower levels
October 20, 2013

Western Canada cash feed barley bids have been stable over the past week, but there are signs now of some small premiums being introduced for November/January delivery. Off-the-combine selling has subsided and growers have become more reluctant sellers.

Southern Alberta 48-pound bids range from about $3.80 to $3.90 per bushel for October delivery. Bids edge higher for November/January movement from $3.90 to $4.00 per bushel in Lethbridge area feedlots.

Moving up to central Alberta, prices are closer to $3.10 to $3.15 per bushel. In Saskatchewan, spots bids have come in at $2.70 to $2.90 per bushel, while December/January delivery slots are at $2.75 to $2.95 per bushel. In Southern Manitoba, central areas are seeing $3.35 per bushel spot and $3.42 for December/January, while western areas of the province are closer to $3.20 per bushel spot and $3.25 per bushel for December/January.

Upside movement has been limited at best. However, any rebound in Western Canadian feed grain bids will for the time being be muted by the weak U.S. corn market. Anecdotal yield reporting has exceeded expectations in many areas of the U.S. Midwest, suggesting that the next USDA forecast of the U.S. average yield will be at least equal, and perhaps exceed, the September forecast of 155.3 bushels per acre. Private trade estimates of the national U.S. yield average are now creeping up toward 158 bushels per acre.

Although the USDA was quiet during the recently ended U.S. government shutdown, the market remained confident that production is at record levels (near 14.0 billion bushels). Therefore, it appears that U.S. production will be large enough to result in a sizable buildup in stocks by the end of the new crop marketing year — estimated now at a large two billion bushels.

Nonetheless, Prairie prices are likely to see some modest upside due to the end of harvest, as well as farmers beginning to feel comfortable with leaving crop in the bin. That said, upside pricing opportunities for Prairie feed grains are apt to be tightly constrained, given ongoing U.S. corn market price pressure. The world has plenty of corn now.

Despite some positive price action this week, corn futures continue the long retreat from the peak of September 2012, declining to the lowest level since late August 2010. Corn prices have made several attempts to trade higher recently, but, unfortunately, each has failed and prices have pressed to new lows over the course of the summer/early fall.

South American corn plantings look like they may take a bit of a hit due to weather issues and more favourable soybean economics causing acreage shifts, so there is some news that the bulls will hang on to. Even if this does turn into something, it will likely only move the markets in mid to late winter.

Until news like this gains some traction, if it does at all, I don’t think there is enough momentum to expect sustained rally potential for feed grains. Prairie feed grain prices may have firmed up a bit and we may see that happen a little more if farmers persist in holding back deliveries, but the reality is feed supply and alternatives are more bountiful this year. It seems like the best chance to expect any notable price bounce in feed grains may be into the second half of the marketing year when market attention will be focused on South American weather and harvest, and when 2014 U.S. acreage intentions come into debate.

For now though, Chicago Board of Trade December corn futures have only modest upside potential, with overhead chart resistance coming into play firstly at $4.45 to $4.50 per bushel, likely capping upside prospects for now. But harvest pressure is expected to keep prices entrenched with the next downside objective at $4.25 per bushel. If weather delays extend the harvest season, testing lower levels of support is not expected.

Into the last half of the U.S. harvest season, we look for prices to firm with a higher trend developing on support from end users extending coverage before the end of harvest. After that, we’re looking for a post-harvest trade range of $4.40 to $5.00 per bushel basis the nearby corn contract into late December.

Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. Call 204-654-4290 or visit www.pfcanada.com to find out more about his services.

Source: FCC

 



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