Prices in the country for new-crop red lentils are sitting around 35 cents a pound, with prices for large green lentils just a couple of cents below that, said Gerald Donkersgoed of Finora Inc. in Surrey, B.C.

In Saskatchewan, by far Canada’s largest lentil-producing province, conditions have been dry. It’s not just the parched soil moisture levels that have the trade concerned, however, but also the lateness of the crop.

“We had a cool spring and green lentils in particular are a long-season crop. We’re looking at a delayed harvest and the possibility of less-than-stellar quality if frosts are early,” Donkersgoed said.

Nervousness about these early crop complications are underpinning values, he said.

“With no lentil stocks left in the world, everyone is totally dependent on new-crop supplies. Unlike wheat, there is no large residual year-to-year, we just don’t have that,” he added.

Besides keeping an eye on the development of the Canadian crop, Donkersgoed said events shaping up in competing countries should also be monitored.

“Unfortunately, someone else’s calamity is often our fortune,” he said.

Dry monsoon

Lentil production in India this year could be threatened by a drier-than-normal monsoon season, a possibility Indian government officials have warned of in recent days.

“India is a focal point of the global pulse trade. They’re the largest pulse producer but typically have a deficit each year. So, if they’re even shorter than normal, that bodes well for our exports,” Donkersgoed said, adding that only time will tell whether or not the weaker monsoon actually materializes.

Another country to watch is Turkey, now harvesting its lentil crop. It seems its crop was delayed and plantings were reduced due to a shortage of plantable seed, Donkersgoed said.

Early optimism that its yields would return to normal has given way to increasing uncertainty as to whether or not that actually happened, he said.

Potentially higher export demand and crop problems in Canada could bode well for cash prices down the road but an offsetting factor is the increased amount of land that was seeded to lentils this year.

Statistics Canada’s 2009 seeded acre report released June 23 pegged lentils acreage in Saskatchewan at 2.32 million acres, compared with 1.61 million acres last spring.

“Buyers will tell you that Canada planted a large crop and they take comfort from the fact that we’re supposed to have significant production,” Donkersgoed said.

At current price levels, a less-than-ideal start to the growing season has not scared growers off from contracting new-crop lentils. They have been scale-up selling, which is very prudent, Donkersgoed said.

“Farmers do a marvellous job marketing their grain, they have learned very well over the years,” he said. “There are people out there who think farmers are unable to market their own grain and need assistance but we have a lot of respect for how farmers watch the market and sell their grain,” he said.

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Statistics Canada’s seeded acreage report released Tuesday said 3.879 million acres of oats had been planted in Western Canada as of June 3. That’s down from its March 31 estimate of 3.955 million and last year’s amount of 4.345 million.

There may be some revision required due to late seeding, but generally Tuesday’s figure seems reasonable, said Terry Tyson of oat milling and packaging company Popowich Milling at Yorkton, Sask.

“This will definitely start to swing the pendulum the other way. We’ve had a couple of crop cycles with big supplies and this moves things back towards normal, if not tight-ish, levels,” he said.

Of course, with roughly 200,000 to 300,000 tons of commercial supplies still laying around and more oats being stored on farms, it will take a while, possibly until February, March or even April next year, before supplies are worked down, Tyson said.

In terms of the impact on prices, the manager said the numbers suggests oat values may have hit their downside.

He noted, though, that the oat cash market in Western Canada has taken its cues from the U.S. oat and corn futures markets and expects that to continue, although price shifts will be mitigated slightly by the shifts of the Canadian currency.

“If all things remain equal, and there isn’t a big wreck in U.S. corn or anything else that would get the whole complex surging, it could be spring before we start feeling like there are tight supplies,” Tyson said.

As of June 23, old-crop oat prices (delivered to elevator) in Western Canada ranged from a low of $1.77 a bushel in Saskatchewan to a high of $2.62 a bushel in Alberta, according to prices collected by Prairie Ag Hotwire.

New-crop prices ranged from a low of $1.83 in Saskatchewan to a high of $2.52 in Manitoba.

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Through the winter and early spring there had been talk that Manitoba farmers would seed up to 400,000 acres of soybeans this year, weather permitting. There were indications of attractive new-crop pricing opportunities and expensive input costs.

Pulse specialists with Manitoba Agriculture, Food and Rural Initiatives (MAFRI) have since lowered their acreage estimate considerably, in light of unfavourable spring planting conditions.

Soybean acreage in the province is now expected to fall somewhere around 260,000, according to Bruce Brolley, a MAFRI pulse crop specialist at Carman, Man. That compares to the 313,000 acres planted last spring.

“It’s been a very hard year to estimate how many acres went into the ground because of the Interlake situation and the flooding and rains in the Red River Valley. Everyday we get better numbers but we won’t have a really hard figure until the end of July,” Brolley said.

Soybeans which were planted toward the end of May — the majority this year — are one to two leaf stages behind normal development, but there is no reason for concern, Brolley said.

Anything planted before that, around mid-May, is in the second trifoliate stage.

“We’re really encouraged by the recent weather. With the heat and humidity that we saw last week, the plants just jumped. Soybeans just love this temperature,” Brolley said.

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As of June 11, canola prices (delivered to elevator) ranged from a low of $9.75 a bushel to a high of $10.95 a bushel, according to prices collected by Prairie Ag Hotwire.

Those values are 10 to 37 cents a bushel higher than week-ago levels.

Old-crop basis levels are attractive because there is still a good export program for canola and grain companies are trying to tempt supplies into the commercial pipeline, said Jerry Klassen, an independent analyst.

As for new-crop canola, basis levels are good because of the lateness of the 2009-10 canola crop in Western Canada.

“There is a strong export program projected for September and October but with the later crop, it’s going to be a struggle to meet some of these export requirements. That’s why we’ve seen very strong basis levels for new crop as well,” Klassen said.

However, farmer selling has slowed because of concerns about their 2009-10 canola crop.

“They’re holding back on sales and so far, in this bullish environment, it seems like they’re being rewarded for waiting,” Klassen said.

“Here and there”

Growers are likely to sell bits and pieces as the market edges higher and basis levels firm but it is difficult to say whether any one price level would trigger a wave of deliveries because so many psychologically-significant price targets have been surpassed, he said.

Concerns about new crop production are only part of the reason farmer sales have been slow, said Tracy Glessing, grain buyer for North East Terminal at Wadena, Sask., about 100 km east of Humboldt.

“Guys are making small sales for the fall here and there and they’re keeping some supplies in the bin so they have something to move if their crop doesn’t work out,” he agreed.

Another reason, though, is that growers have been watching prices move higher lately and they’re wondering if they can get better prices by holding out a while, Glessing said.

“Optimism is still playing a part in this. Some growers still have $15 a bushel canola left in their heads from last year,” he said.

Finally, there may not be a lot of canola left to sell.

“I estimate that, at least in our area, there is only about a quarter of production left on farms. Sure, some guys have a lot left and the next guy has none, but overall, I would say only about a quarter is left,” Glessing said.

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As of June 10, old-crop No.1 Crimson lentil prices (delivered to elevator) were sitting at 42.5 cents a pound, while No.1 Lairds were priced at 40.5 cents a pound, according to Prairie Ag Hotwire.

That compares to 32 and 29.5 cents a pound, respectively, for new-crop No.1 Crimson and Laird lentils.

Compared to month-ago levels, old-crop prices have moved from one to three cents a bushel lower.

The main reason for the decline is the gap between old-crop lentils prices and cheaper new-crop values, said Greg Simpson, president of Simpson Seeds at Moose Jaw, Sask. Companies don’t want to be stuck with a high-priced product to sell, he said.

“Most people are not willing to take stocks on now if they know it’s only a matter of time before they can buy cheaper lentils. They’re going to exhaust their existing supplies and wait for new-crop,” Simpson said.

Turkey’s red lentil harvest has also started to weigh on the lentil market, although the trade is uncertain as to the quality and size of Turkey’s crop.

For old- and new-crop prices, the recent surge in the value of the Canadian dollar versus the U.S. dollar has been another bearish price influence.

“In just a few weeks, the Canadian dollar moved from US80 to 90 cents, roughly speaking. That is nearly 10 per cent, so if you’re talking about 40-cent (per pound) lentils, that means a four-cent move in price just based on the currency alone,” Simpson said.

The recent move in crude oil futures to multi-month highs has meant higher transportation costs, including ocean freight rates, which also impacts the lentil price.

Tightened supplies

However, supplies for the commercial pipeline in Canada are only “trickling” in and that, combined with tight supplies, is keeping a floor under the cash market, Simpson said.

As for new-crop lentil prices, values in Western Canada are seen holding fairly steady over the next month until the trade gets a better feel for 2009-10 production and quality.

Simpson sees Canadian lentil acreage coming in close to 2.4 million acres, compared to the 1.97 million acres forecast in the last Statistics Canada acreage report.

Of that amount, 60 per cent will be red lentils and the balance will be green lentils, he believes.

Despite talk of dryness in Saskatchewan, Canada’s largest pulse producer, there is no reason to panic about this year’s lentil crop, he said.

“If 75 per cent of Saskatchewan was showing drought conditions and 25 per cent was showing adequate to good moisture levels, I would be concerned, but we’re seeing the reversed situation,” Simpson said.

“Lentils are very drought-resistant and they’ve had good germination. The plants are growing, there’s been little evaporation as a result of the cool weather and there’s been some showers. Really, there is still the opportunity for the province’s dry regions to be revived. It’s way too early to write the lentils in those areas off.”

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“The market doesn’t seem to realize that prime barley land in Saskatchewan and Alberta is very dry,” said a market analyst. Farmer selling, he indicated, is already starting to significantly slow as producers become concerned about the 2009 crop.

The analyst noted that barley prices have been depressed, compared to U.S. corn markets, in recent months due mainly to the large barley supply in Western Canada.

However, he added, barley’s “huge” discount to corn has been slowly disappearing as the grain trade notes the spreading production problems on the Prairies.

Currently, he said, barley in Lethbridge, Alta. has been trading in the $172-$173 per tonne area and further gains are likely as dryness remains a persistent problem.

Another cash trader in Alberta noted that barley has been at a larger-than-normal discount to U.S. corn, but that has been narrowing as demand is also starting to show up as end-users have become concerned about finding reasonably-priced barley.

There is concern, he said, that with U.S. corn supplies likely to be very tight this year and dryness reducing Western Canada’s barley crop, end-users are starting to cover some of their new-crop needs.

The analysts noted that with many U.S. analysts predicting that the average U.S. corn prices will be over $5 per bushel, Canadian barley values are likely to be trading over $4/bu., probably close to the $4.25/bu. in the Alberta market.

According to Prairie Ag Hotwire, current barley cash bids range from $2.98 to $3.59 per bushel in Manitoba, up from $2.52-$2.83 on May 8. In Saskatchewan current prices are $2.49- $3.10, up from May 8’s $2.25-$2.74, while in Alberta, current values range from $2.75- $3.82 per bushel, up from $2.56 – $3.61 on May 8.

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As of June 5, the 130 million-litre per year plant at Minnedosa, about 50 km north of Brandon, was offering producers $4.60 a bushel for July delivery of wheat and corn. The plant is currently using both feed stocks to produce its ethanol.

“We’re going month-by-month for deliveries right now just because of the uncertainty of the market. We haven’t done anything yet for new-crop contracts out here,” the company source said.

The plant tries to keep abreast of the futures markets but weather can always throw a wrench into those plans, he said.

Cold weather across the Prairie provinces and dry areas in western Saskatchewan have some people thinking about the possibility of lower crop production this year.

On the other hand, poor weather could also mean higher supplies of feed-quality wheat, he said.

Farmer interest at the current price has been slow, mainly because growers have been out in their fields seeding, but it has been picking up again, the source said.

In general, the Minnedosa ethanol plant has seen fewer winter wheat and Canadian prairie spring wheat deliveries that it thought it would, but a lot of Manitoba corn growers have gotten on board, which the company is happy to see, the source said.

“It gives us an extra option. We know the Canadian Wheat Board is actively selling the winter wheats into the milling market, so farmers have that option and they can secure strong prices if their wheat is good quality. It can go in both directions and that is great,” the source said. “If the farmer has more options, it is better all the way around.”

As of June 5, other bids in Manitoba for feed wheat (delivered to elevator) ranged from $4.04 to $4.24 a bushel, according to prices collected by Prairie Ag Hotwire.

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“Viterra and Cargill have been calling customers of mine asking them to deliver canola early. That’s a sign that they still need quite a bit of canola moving in order to meet their sales commitments through the middle of July,” said one Winnipeg-based grain and oilseed broker.

Although it appears that China has backed away from the Canadian canola market for the time being, there are still ships to be filled.

According to the Canadian Ports Clearance Association, nine vessels scheduled to load canola are set to arrive in Vancouver between June 5 and June 21.

Meanwhile, growers have been very busy seeding and getting early field work done and have not been making many deliveries into the commercial pipeline, the broker said.

The current commercial demand may not significantly impact canola futures but basis levels will start tightening if the grain companies need to keep canola moving that badly and farmers ask to be rewarded for making early deliveries, he said.

“If someone calls me and asks me to deliver a month early, I’ll say, ‘Well, give me another boost in price and I can have it there in half an hour.’ That kind of thing is happening,” the broker said.

As of June 3, old-crop canola prices (delivered to elevator) in the cash market ranged from a low of $9.75 a bushel in Saskatchewan to a high of $10.64 a bushel in Alberta, according to prices collected by Prairie Ag Hotwire.

Those values are 14 to 54 cents a bushel higher than week-ago canola prices and 38 to 77 cents a bushel higher than month-ago prices.

New-crop canola prices ranged from a low of $9.73 a bushel in Saskatchewan to a high of $10.39 a bushel in Alberta.

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“It’s hard to get a real sense for the market because there are not really enough chickpeas moving right now,” said Colin Young of R. Young Seeds Ltd. at Mortlach, Sask., west of Moose Jaw.

Grower bids in Saskatchewan are sitting at 30 cents a pound for old-crop nine-millimetre Kabuli chickpeas, 25 cents for eight-mm and 20 cents for seven-mm chickpeas, he said.

There has been steady selling interest from farmers at that price level although many growers are not marketing their chickpeas aggressively right now, Young said.

“It’s not that the chickpea market is horrible, it is just the perception of what the relative value should be due to the additional cost of growing chickpeas,” he said. “Growers figure that if lentils are selling for, say, 30 cents a pound, then chickpeas have to be 40 cents a pound. But they’re at profitable at these levels.”

On the demand side, chickpea exports have been sluggish because of the price tag and Canadian exporters are not willing to sell chickpeas for what would be considered a competitive global price, Young said.

“The other issue is that the new variety that everyone is growing because of its superior disease resistance produces mainly eight-mm Kabuli chickpeas. When we get into the smaller caliber chickpea markets, Canada faces stiff competition from lower cost producers such as Turkey, North Africa or Russia,” he said.

For new-crop chickpeas, Young said some buyers are still holding back on offering prices until things are further along, himself included.

Many people expect 2009-10 chickpea acreage to be fairly similar to last year’s size, but the merchandiser thinks a slight increase is likely based on what he has heard from farmers in his area.

That said, chickpea production in Western Canada will still be small compared to levels seen two to three years back and the crop is behind schedule.

“It’s late, probably a week to 10 days in fact, but a lot depends on what kind of growing season we have from here on out,” Young said.

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“Prices seemed to have taken a quick little spike upwards and now they’re sitting there,” said Paul Martens, head of operations for Prairie Flax Products at Portage La Prairie, Man.

The rise in price seems to have been caused by a push by a few of the large grain companies who were likely short on flax supplies and needed to cover sales commitments, Martens said.

Flax is also benefiting from the uptick seen over the past month in other oilseed markets, mainly canola.

This is not typically the time of year when export demand drives flax prices higher, which suggests that the market is being assisted by spillover support, Martens said.

As for the 2009-10 flax crop, Martens said he’s skeptical that the late seeding start will drive flax acres in Canada up significantly.

Certainly some producers will switch to flax because they were not able to seed longer-season crops, but on the other hand, farmers are worried about the potential for early frosts and the damage that would cause to their flax crop.

Farmers in areas of Manitoba that are still wet will have to wait a while longer before they get onto their fields and the delay could mean they are too late to seed anything but cereal crops that can be sold as feed.

“If flax catches a frost, it would be disastrous. Worse-case scenario, guys can plant barley or wheat, which they can always use for feed,” Martens said.

As of June 2, old-crop flax prices (delivered to elevator) ranged from $10.42 to $12 a bushel in Saskatchewan, from $11.05 to $11.78 a bushel in Manitoba and from $10.57 to $11.20 a bushel in Alberta, according to prices collected by Prairie Ag Hotwire.

That’s anywhere from three cents to $1.75 a bushel higher compared to month-ago prices.

New-crop flax prices were only available for Saskatchewan and ranged from $8.80 to $11.50 a bushel.

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