While off-the combine deliveries were slowing down with the advent of winter, the commercial pipeline is still filled with recently harvested canola supplies. The weekly Canadian Grain Commission numbers showed that weekly farmer deliveries declined to 378,800 tonnes during the first week of November, from about 500,000 the previous week. However, with exports also down on the week, total visible supplies of 1.494 million tonnes are more than enough to meet the nearby demand and should be limiting end-user buying interest.

From a chart standpoint, the January contract traded below the psychological C$480 per tonne mark during the week, with prices hitting their weakest levels since August 2017. However, values were hard pressed to go much below that, with speculative short covering coming forward on any attempts at breaking lower.

However, most analysts remain of the opinion that it’s only a matter of time before the support fades, with a downside target of C$450 a distinct possibility over the next few months.

Activity in Chicago Board of Trade soybeans will have a big influence on what happens in the canola market as well, with the United States harvest wrapping up and attention turning to the South American growing season.

The U.S. Department of Agriculture released updated supply/demand estimates on Nov. 8 which included a sharp decline in projected soybean exports and a resulting increase in the U.S. soybean ending stocks forecast. While there have been occasional tweet-fueled rumblings of a possible resolution to the China/U.S. trade dispute, nothing tangible has happened yet and exports could decline further in subsequent reports.

A meeting between U.S. President Donald Trump and Chinese President Xi Jinping at the G20 conference in Argentina at the end of November will be followed closely.

Mounting concerns over African swine fever in China could also come to play in the soy market, as any reductions in China’s large hog herd would cut into the global demand for soymeal.

Soybean futures posted some large price moves during the week, but were trending lower overall.

Corn was also choppy during the week, with seasonal harvest pressure keeping the overall bias pointed lower despite a downward revision to the U.S. yield estimate from the USDA.

For wheat, ample world supplies and continued export competition out of the Black Sea region kept North American prices under pressure. However, winter wheat seeding delays in parts of the U.S. Plains were being followed as a potential supportive influence, with some intended acres likely ending up unseeded before the winter sets in.

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Average Canada Western Red Spring (13.5% CWRS) wheat prices were down slightly, falling by less than a dollar to C$2 per tonne, according to price quotes from a cross-section of delivery points compiled by PDQ (Price and Data Quotes). Average prices ranged from about C$249 per tonne in southeastern Saskatchewan, to as high as C$270 in southern Alberta.

Quoted basis levels varied from location to location and ranged from $34 to $55 per tonne above the futures when using the grain company methodology of quoting the basis as the difference between the U.S. dollar denominated futures and the Canadian dollar cash bids.

When accounting for currency exchange rates by adjusting Canadian prices to U.S. dollars (C$1=US$0.7625) CWRS bids ranged from US$190 to US$206 per tonne. That would put the currency adjusted basis levels at about US$9 to US$25 below the futures.

Looking at it the other way around, if the Minneapolis futures are converted to Canadian dollars, CWRS basis levels across Western Canada range from C$12 to C$33 below the futures.

Canada Prairie Red Spring (CPRS) wheat bids were weaker, falling by C$4 to C$5 per tonne depending on the location. Prices ranged from C$213 to C$229 per tonne in Alberta and Saskatchewan.

Average durum prices were narrowly mixed, with bids ranging anywhere from C$211 in southwestern Saskatchewan to C$222 in western Manitoba, depending on the location.

The December spring wheat contract in Minneapolis, which most CWRS contracts Canada are based off of, was quoted at US$5.8000 per bushel on Nov. 8, down by one U.S. cent from the previous week.

The Kansas City hard red winter wheat futures, which are now traded in Chicago, are more closely linked to CPRS in Canada. The December Kansas City wheat contract was quoted at US$4.9725 per bushel on Nov. 8, down by seven U.S. cents compared to the previous week.

The December Chicago Board of Trade soft wheat contract settled at US$5.0775 per bushel on Nov. 8, down by a cent on the week.

The Canadian dollar settled at 76.25 U.S cents on Nov. 8, which was steady on the week.

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“It’s a pretty interesting report to tell you the truth, but really the focus has been on the beans,” said Jack Scoville of Price Futures Group in Chicago, Ill.

It had been expected that U.S. soybean yields and production would be lowered, while ending stocks would be increased. However, the Nov. 8 reports still managed to throw a curveball into the market by changing the soybean export demand number.

Export estimates for U.S. soybeans were lowered to 1.900 billion, down 160 million bushels. This was due primarily to there being less expected exports to China.

CBOT soybean contracts dropped around 10 to 15 cents almost instantaneously after the reports were released. However, by the end of the day contracts had recovered from the shock, with the January contract closing at US$8.79 per bushel, down less than a cent.

The U.S. soybean yield for the 2018/19 crop year was lowered to 52.1 bushels per acre and production lowered to 4.600 billion bushels. Despite the cuts, both will still be records. Ending stocks rose to 955 million bushels.

“It’s a negative report for beans. There’s no doubt about it and it’s going to keep us under a little bit of pressure here for a while. But I think we’ll see some constructive demand down here,” Scoville said.

With the latest numbers there will be even more attention paid to the G20 summit at the end of month in Argentina, where U.S. President Donald Trump is set to meet with Chinese President Xi Jinping.

“I don’t know if there’s going to be more pressure on our boy or not here to cut a deal. Will probably make the Chinese feel a little bit better that they can get a little bit better deal for themselves,” Scoville said.

The USDA reports for corn were mostly in-line with what expectations had been. U.S. corn production was lowered to 14.626 billion bushels and the yield lowered to 178.9 bushels per acre. Corn ending stocks also saw a decrease to 1.736 billion bushels.

Immediately after the report release CBOT corn contracts were quiet, not showing much of a reaction. However, some of the sell-off in soybeans did transfer over into corn contracts pressuring them lower. The corn market did recover though, with the December contract closing at US$3.74 per bushel, up just over a cent.

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With the North American harvest pressure easing and the South American soybean harvest still a number of months away, canola has window of opportunity where it could see a modest bounce, according to analyst Mike Jubinville, of ProFarmer Canada.

He said “bargain basement prices” were rumoured to be bringing in more Chinese export demand for canola, which was helping develop a baseline on the futures.

However, “the bearish influence of soy is certainly still there,” he added. He expected to see reductions in soybean exports out of the United States and a resulting increase in ending stocks, given the ongoing trade dispute between the U.S. and China.

If weakness in soybeans causes canola to break lower, Jubinville placed support in the January contract at C$475 per tonne, with the next downside target after that at C$450 per tonne.

On the other side, any weather scares during the South American growing season could provide the spark for a move higher in the oilseeds. However, farmers are also likely waiting to sell above the current market, with cash bids in the C$11 per bushel area seen as a target for many producers that could temper any advances, according to Jubinville.

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“The marketplace booked up a fair bit of corn in advance of it, so through September, December and even out into March. So that’s all been done, that corn will continue to come in,” said Dave Guichon, owner of AgValue Group in Calgary, Alta.

Corn from the United States and Manitoba started making its way into feedlots last year, as barley and wheat supplies were tight following a dry growing season in southern Alberta and Saskatchewan. And while the cold, wet fall this year has led to an influx of downgraded grain hitting the feed market that doesn’t mean corn will be leaving feedlots any time soon as most had pre-booked corn supplies.

“We’ve finished up harvest here. We’ve gotten a fair bit of barley and a fair bit of feed wheat now that is available for the marketplace. It’s not coming in droves or anything like that, it’s small amounts but our demand is small because it’s already been covered by corn,” Guichon said.

According to Guichon, the amount of downgraded grains hitting the market for feed isn’t completely known yet. Farmers are still accessing their harvested crops, seeing what can be dried and what can be blended and bought by elevators. However, Guichon doesn’t expect there to be a lot of grain hitting the feed market because most of the downgraded grain is located in the northern Alberta.

“We don’t have access to that market down into southern Alberta because of the freight, logistics are too wide…so it never would have been coming to southern Alberta,” he said.

The corn imports are keeping a lid on the feed grain market in Lethbridge. According to Guichon, corn is currently at C$246 to C$248 per tonne, feed barley at C$246 per tonne and feed wheat at C$240 per tonne.

Exports are also playing into the feed grain market. The barley export market has been strong during the last year due to the drought situation in Australia, according to Guichon. Canada has been able to take over market share in Asian countries, such as Japan, that Australia would usually sell to due to their closer proximity to the market.

“There’s been some sales done that we maybe normally wouldn’t get and that’s sort of kept the price relatively high,” he said.

However, heading into the winter the export market isn’t a safe bet. Political tensions between Canada and Saudi Arabia, has led Saudi Arabia to stop buying Canadian barley. But Canada may have an opportunity to sell more to China, due to the China/U.S. trade war, stopping business between those two countries.

“A lot of that will depend on currency, what the Canadian dollar does, how we compete. Relatively speaking, global supplies of both malt and feed are tight,” Guichon said.

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Despite difficult harvest conditions, producers were able to pull off average to above-average crop quality overall. Crops that came off prior to the rain and snow in September have been grading in the top two grades, while some crops that have recently come off have been downgraded due to weather-related factors such as sprouting, bleaching, staining and frost. There have been limited reports of diseases such as fusarium head blight and ergot affecting crop production this year.

Crop yields vary greatly across Saskatchewan because of the amount of moisture received throughout the season. Overall provincial yields are about par with the 10-year average, although many areas are reporting higher-than-expected yields thanks to timely rain. Yields in many southern and central areas were significantly affected by the hot and dry conditions this summer. Average provincial yields at this time are being reported as 43 bushels per acre for hard red spring wheat, 38 bushels per acre for canola, 22 bushels per acre for soybeans, 35 bushels per acre for field peas, 61 bushels per acre for barley, 1,236 lb. per acre for lentils and 1,153 lb. per acre for chickpeas.

Topsoil and subsoil moisture conditions have drastically improved with the recent snow and rain, but remain a concern in much of the province. Significant moisture will still be needed heading into winter to replenish what has been lost throughout the growing season. The subsoil is very dry and that growing conditions may be affected next year if conditions do not improve according to many producers. Heading into winter, topsoil moisture on cropland is rated as five per cent surplus, 64 per cent adequate, 24 per cent short and seven per cent very short. Hay land and pasture topsoil moisture is rated as two per cent surplus, 52 per cent adequate, 36 per cent short and 10 per cent very short.

Average hay yields on dry land are reported as just over one tonne per acre (alfalfa and alfalfa/brome), 0.9 tonne per acre (other tame hay), 0.7 tonne per acre (wild hay) and about 1.7 tonnes per acre (greenfeed). Hay quality going into winter is rated as one per cent excellent, 85 per cent good, 13 per cent fair and one per cent poor.

Although most livestock producers have indicated they will have adequate supplies of hay, straw, greenfeed and feed grain heading into winter, producers in drier areas of Saskatchewan reported they will have inadequate winter feed supplies and shortages are likely if the winter season is extended.

With the drier-than-normal field conditions at fall seeding time, the number of acres seeded to winter cereals is below average in most areas; however, rain in September allowed the winter cereal crops to germinate and establish in many areas. When time and weather permit, producers hope to continue with fall work such as working and cleaning up fields, picking rocks, hauling grain and bales, moving cattle and putting down fertilizer.

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“It feels like we’re in a bit of a transition time,” said Tyler Fulton, director of risk management with Hams Marketing Services in Winnipeg. He noted that prices saw a sharp drop in August, before recovering in September and then holding steady through October. He described that activity as a “reversal of the normal seasonal trend,” due in part to broader market uncertainty that stems from the trade war between the U.S. and China.

The U.S. hog slaughter has been climbing recently, taking pork production in the country to record high levels. Those heavy supplies are weighing on prices, according to Fulton.

For local producers, “we’re probably right on the cusp of where some guys are profitable and some guys are not profitable,” said Fulton. He said feed costs were also cutting into profits in some cases. While soybean prices have hit their lowest levels in years; that weakness has not yet transferred to softer soymeal prices.

“There too, we may be on the cusp of a change in the trend,” said Fulton.

The fourth quarter is often a struggle to stay in the black, “but longer term, the prospects look very good,” said Fulton, pointing to the premium in the deferred futures over the current cash market.

The U.S. futures are pointing to strong hog prices for 2019, with concerns that African swine fever in China will cut into their pork production, according to Fulton. A reduction in China would swing more demand to North American pork, and underpin prices.

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”We took the opportunity to include some upgrades to allow us to include a broader range of pea protein products to better serve the continuously growing market demand,” said James Bozikis, Roquette’s head of communications and public affairs for the Americas in an email.

Bozikis said the company wants to provide a broader range of products to meet more applications.

“You only get the chance to build once – we wanted to ensure we had included all we could in to the plans before we started building in earnest,” added Bozikis.

The C$400 million pea-processing plant was originally announced in January 2017 and the France-based company broke ground on the project in September 2017. Originally it was to operational by April 2019, but that was later changed to mid-2019 and then 2020. Bozikis confirmed the plant is now to be operational during the second half of 2020.

Once in full production the plant is expected to process approximately 120,000 tonnes of peas annually.

According to Statistics Canada, there were 3.6 million acres of peas seeded this year nationally. Of those, 85,000 acres were in Manitoba and 1.9 million acres in Saskatchewan.

Despite Manitoba’s low acreage, Portage la Prairie was chosen as the location for the Roquette pea-processing plant due to the area’s business environment according to the company.

“While we may process peas from other provinces, Portage offers an ideal business environment to accelerate our development and contribute to further developing pea production in Manitoba,” Bozikis said.

Roquette is hoping pea acreage will increase in Manitoba, but according to Gordon Bacon, chief executive officer of Pulse Canada, the financial incentive will need to be there for farmers for that to happen.

“It’s not the gross returns; you really have to look at net returns. You have to look at what your seed costs are. What your fertilizer costs are and what other inputs you have,” Bacon said.

Also crop rotation could play into more peas being grown.

“You can’t grow canola continuously without risking a higher level of disease. That’s the same with cereals. That’s the same with pulses,” Bacon said.

Prices for peas took a tumble in November 2017 when India imposed tariffs of 50 per cent on pea imports. Producers had been getting over C$8 per bushel, but were suddenly faced with prices around C$6.50 per bushel.

“Believe it or not, and beyond my explanation, it has climbed back up. We’re getting C$7 a bushel on yellow peas,” said Allan Johnston, president of Johnston’s Grain in Welwyn, Sask.

For green peas, Johnston said the price is up to C$9 per bushel delivered.

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“We think the market’s getting kind of overdone down here and this might be your best chance…if we do get a cold winter I think we’ll see these prices really pop,” said Phil Flynn of The Price Futures Group in Chicago, Ill.

Crude oil prices have been down lately. On Nov. 5 Brent crude closed at US$72.16 per barrel and West Texas Intermediate crude at US$62.52. Both oil benchmarks have slid more than 15 percent since hitting four-year highs in early October.

However, even with oil prices on the downswing, Flynn said there should be concern about diesel prices. Supply has been tightening globally, which could lead to a price spike.

“As of last week I think (the United States oil stocks were) five per cent below the five-year average and there’s a lot of concern that if we get a really cold winter it’s going to be difficult to meet that demand and get caught up,” he said.

China is also facing a tightening supply, according to Flynn. Latest news out of the country has the Chinese government telling the western provinces to ramp up purchases of diesel and heating fuel for the winter. China has faced supply shortages in the past and the government is trying to lower the chances of that happening again.

There have also been reports out of Russia that they are thinking of putting export duties on oil because they’re concerned about their distillate fuel supplies heading into the winter.

According to Flynn, this all leads to there being an overall bullish backdrop for diesel prices.

While gas prices have been lower than diesel prices lately on the Prairies, consumers shouldn’t be expecting diesel prices to come down, according to Flynn.

“If you look at the supplies of gasoline, they’re really above average for this time of year. Even though demand has been relatively strong, diesel fuel is below average and that’s why you’re seeing that discrepancy,” he said.

While the U.S. sanctions against Iran have been making news headlines in regards to oil prices, Flynn doesn’t think this has been affecting diesel markets much due to 180-day exemptions the U.S. has placed on eight importers who work with Iran.

“Right now the market seems to be dismissing those because of the waiver and I think one of the reasons they had to give waivers is because of the tightness of distillate,” Flynn said.

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“This year there are some visual black seeds in the crops, but it’s not that bad. It’s a pretty small amount, kind of negligible for the buyer,” said Mike Allaire, the senior commodity trader with Ilta Grain Inc. in Surrey, B.C.

He said the oil content in this year’s crop is between 42 to 45 per cent.

Brian Johnson, general manager commodities for Johnson Seeds in Arborg, Man., said as well the quality of flax this year has been very good.

“Before the rains we had this fall and the bad weather, probably 35 to 40 per cent would be classified as excellent. The rest is good. It may not be suitable for the high end edible market, but it is definitely of a very good quality,” Johnson said.

He added that some of the later seeded flax suffered from some frost damage.

“The overall harvest is probably almost complete. It was a godsend the weather we got in mid-September onwards as only 50 per cent of the crop had been harvested at that time,” Johnson said.

Allaire said this year’s crop is one of the smallest he has seen at less than 500,000 tonnes, which is less than half of what he has witnessed before.

He said the price for flax is holding at $13 per bushel delivered Saskatchewan plant.

Much of the Canadian crop is being shipped to China and the United States.

“The U.S. had a very small crop this year, they’re buying a lot from Canada. In my opinion we’ll be sold out by the new crop,” Allaire said.

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