Canada Markets

A recent question from a producer was posed to me regarding weakness in the canary seed market despite the tight supply situation as presented by Statistics Canada and Agriculture and Agri Food Canada supply and demand data.

Tuesday's Dec. 31 stocks report did indeed point to how tight the situation is, on paper. Dec. 31 stocks were reported at 81,000 metric tonnes, down from 113,000 mt in December 2012, while the five-year average of stocks held on Dec. 31 is 153,000 mt. Dec. 31, 2013, stocks are the lowest reported by Statistics Canada in data going back to December 2000.

To further appreciate how tight this situation is, according to government data, the 2012/13 January through July disappearance is reported at 91,000 mt, which is higher than the current level of December stocks. The five-year average disappearance is 110,000 mt, while the lowest level of disappearance in the past five years is 81,000 mt. Only three times since 2000/01 has the January through July demand fallen below 100,000 mt, with the 81,000 mt disappearance in 2011/12 being the lowest.

Meanwhile, the price drop as seen on the attached chart has intensified, with Saskatchewan Agriculture data showing a greater than 2 1/2 cent drop in 2014, taking us to levels not seen since September 2010.

It is widely accepted in the trade that Statistics Canada tends to understate production in some of the smaller crops, which perhaps speaks to the difficulty in gathering accurate information, especially for crops such as canary, which can be stored for years given tendencies for producers to wait for attractive flat price bids.

One trade perspective was revealed in a recent presentation given by a well-established trade participant during Crop Week in Saskatoon. In this presentation, canary seed acres for 2013 were estimated at 245,000 acres, as compared to Statistics Canada's estimate of 200,000 acres. Total 2013 supplies were pegged at 153,000 mt, exports were pegged at 115,600 mt with the estimated 2013/14 carryout estimated at 23,700 metric tonnes. Statistics Canada has estimated 2013/14 supplies at 141,000 mt, have viewed exports higher at 125,000 mt and have called for ending stocks to slip to an extremely tight 5,000 mt. Some trade estimates suggest that canary seed supplies are even much higher, while we may never really know until bids hit popular flat-price targets that may be well above today's bids.

If theories surrounding price retracements have any bearing, chart support may be found in the 18- to 19-cent range. The 61.8% retracement of the move from the May 2010 low of 12.55 cents to the February 2011 high of 29.25 cents is 18.93 cents/lb. Also, Dow Theory would suggest the 67% retracement of that same uptrend to be the last line of defense, which would result in potential support at 18.06 cents/lb. Beyond these levels, the August 2010 low of 17.5 cents may act to support prices.

In their most recent supply and demand analysis, Agriculture and Agri Food Canada has called for a 23% increase in canary seed acres to be seeded in 2014, while leaving ending stocks for 2014/15 historically tight at 5,000 mt. Current price activity would suggest that the situation is nowhere near as tight as indicated in government data.

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

(ES)

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