Canada Markets

The bi-weekly Wheat Letter from the U.S. Wheat Associates released on July 10 presents both positive and negative factors for the wheat and durum market from the stand-point of the Canadian industry.

First the positives. The month of June was the first month of the U.S. crop year, with hard red spring sales in the U.S. reaching a volume which was reported to be 62% above the pace of last year's volume as well as 62% higher than the five-year average pace. The 2.78 million metric tonnes sold as of June 29 was reported to be the highest volume sold as of this date in the past 10 years.

The move from the $7.99/bu high on the continuous HRS chart reached on the May future in the month of May to current levels has uncovered demand and should this continue, could signal that the current downtrend may be nearing an end. Given that both daily and weekly momentum indicators are deeply oversold, both commercial and noncommercial selling could slow.

A similar situation was presented for durum exports. The report cites problems in the Italian crop, also mentioned in the CWB's June 26 Pool Return Outlook release, which was suggested to increase U.S. durum prices by $30/mt over the month of June. Despite higher prices, durum sales as of June 29 were reported to be 65% above last year's volume at 190,900 mt, although this number is suggested to be 13% below the five-year average.

DTN's National Durum Index has risen even further than the $30 reported. The index rose from $6.91/bu on May 30 to a high of $8.59/bu on June 27, a difference of $1.68/bu or $61.73/mt, although has since stabilized at $8.33/bu as of July 10. Given a slightly smaller crop expected in the U.S. along with lost acres on the Canadian prairies due to recent flooding, price signals in June along with increasing demand is a positive sign. Recent social media communications have indicated over $8/bu bids for new-crop durum loaded railcar in Saskatchewan which could be a sign of things to come.

Not so positive news is the U.S. Wheat Associates suggesting that U.S. sales of spring wheat and durum are partially boosted by Canada's logistical problems, with the U.S. making spot sales of both wheat and durum as Canada is viewed as being unable to meet new nearby business. The report states that demand this time of year is normally shared by Canada and the U.S.

How many acres do you feel have been lost in total across the prairies due to unseeded and flooded land? You can weigh in with your thoughts on DTN's 360 Poll on your DTN Home Page.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(AG)

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