Wheat futures recovered to set course for their longest
winning streak since September after Canada revealed that a jump in its
inventories had fallen short of expectations, despite a record harvest and logistical
setbacks to exports.
Canada's wheat inventories ended 2013 at 28.4m tonnes, up
38% year on year, "as a result of a 38% annual increase in wheat production", Statistics
However, the figure came in more than 500,000 tonnes short
of that expected by investors, who had forecast a bigger impact from the record
harvest, and the drag to Canada's exports from an infrastructure squeeze,
exacerbated by cold weather.
Separate data on canola showed a bigger rise, of 55% to
12.6m tonnes, in inventories, some 200,000 tonnes more than traders had
forecast, again reflecting record production last year and port and rail
The data helped wheat futures in Chicago recover from small
losses just before the data were released to stand at $5.74 ¾ a bushel at 10:00
local time (16:00 UK time), up 2.0% on the day.
"Canada looks like it has done a better job than people had
thought at getting rid of its wheat," a UK trader told Agrimoney.com.
"It still has a lot to dump on the market, but with futures looking
a bit oversold, it gives investors another reason to cover some short
As an extra, technical boost the price gain meant that the
March contract, which regained its 10-day moving average in the last session, returned
above its 20-day moving average for the first time in two months.
Official US data overnight showed the condition of US winter wheat in the top growing state, Kansas, declining sharply, amid worries over winterkill.
On-farm vs commercial
The StatsCan data nonetheless appeared to reveal substantial
impact from the country's tight logistics, with the inability to shift crops
from growers' stores meaning that on-farm stocks of all major crops rose
significantly year on year, while commercial inventories fell.
For wheat, on-farm stocks soared 52% to a record 25.0m
tonnes, while commercial inventories dropped 19.2% to 3.4m tonnes.
For canola, the amount of the rapeseed variant stored on-farm
was, at 11.7m tonnes, 55% higher than a year before, while commercial stocks
were 14.6% smaller.
The International Grains Council said last week that Canadian
crop export volumes "are likely to be capped by logistical problems in transporting
large volumes by rail.
"Capacity on the network is limited, and exporters are
competing not only with alternative grains, but also with other bulk commodities,
such as oil, coal, sand and mineral ores.
"Extremely cold weather is compounding the problem."
In Winnipeg, canola for March delivery stood unchanged at Can$426.40 a tonne.