Canada Markets

While some producers question the large supplies of grain that are being suggested on the Prairies, since perhaps they are caught up on their deliveries against this year's contracts, other people are stressed. They may have moved little volume while struggling to simply find a bid, since many companies have been off the market for months on end.

Grain companies are not reflecting concern about supplies, given the bids offered through to September. While both wheat and canola basis levels narrow in May as would be expected, basis levels widen through the rest of the crop year and into September. In fact, the average Prairie basis for canola in September at $58.37 per metric tonne, based on available internet bids, is wider than current levels. This suggests that this year's supply issues are set to carry into the next crop year as a result of huge carryout stocks.

The forward curves for both of these commodities (a line which connects consecutive futures values over a number of contracts) reflect a bearish situation, barring a short-term inverse in the March/May spring wheat contract due to delivery issues. Otherwise, the spring wheat curve remains upward sloping and represents bearish fundamentals for the crop. Futures spreads for both commodities, an indicator of commercial activity, are drifting sideways and indicate a largely neutral response from the commercial side of the industry.

Feb. 4 marks the next Statistics Canada release date, and will focus on grain stocks as of Dec. 31, which represents the first one-third of the crop year.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

(ES)

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