Major grains & oilseeds markets
There was a general sense of uncertainty in the global markets, following the US missile strike on Syria.
Futures at the CBOT closed mixed, but had some support from losses in the US$; it hit a five-month-low which is bullish for commodities. However, for oilseeds, the expectation for a big US production and competing supplies from South America pressures deferred contracts. Feed grains are also dealing with competing supplies from South America. Still, while FAO expects wheat stocks to grow by 2.5%, to 246.6 million mt, it expects corn stocks to decline by 4%, to 207 million mt as a result of a sharp decline in production in China and the United States.
Index Funds were good sellers again last week, selling ~4 million mt. Spec Funds sold almost 6 million mt. Most of this was oilseeds, as the specs were still long SBN’s ahead of the USDA report. Big question is if they will extend short at these low price levels.
Weather remains benign in most areas.
- Funds were shown Friday to be holding a net short of 24,000 contracts across the complex, having been long 275,000 at the start of March, and if that selling has now gone, markets may stabilise as moves back front and center.
- China reportedly bought volume in South America on their return from the holiday, which lent some late week pricing support but Brazil crop estimates just keep moving higher.
- We could see the market drop to $9.20 November in the short term.
- Canola futures were stronger on Friday, recovering from earlier losses as gains in CBOT soyoil and speculative short covering provided support. Tightening old crop supplies and the need to ration some demand added to the firmer tone.
- However, the large South American soybean crop and expectations for big North American oilseed acres this spring remain bearish.
- Quarterly stocks of hard red spring wheat in the US were higher than expected, pressuring MGEX lower. The strong export sales of hard re winter wheat supported KCBT, but beneficial rains across the US capped gains and pressured CBOT lower.
- The first national crop ratings were slightly better than expected. Ratings across the Southern and Central Plains improved noticeably following recent rains and precipitation continued across the Plains and Midwest, thus progressively reducing the threat of a weather issue this spring.
- For next year, USDA expects US durum acres to fall 17% to 2 million acres. For the EU, Stratégie Grains in Europe expects reduced planted acres and more normal yields to cut 2017/18 EU durum production by 9% year over year to 8.9 million mt, though the European crop is looking pretty good right now. Stratégie Grain also forecasts 2017/18 Mexican durum production to fall by 20% from 2016/17 at 2 million mt. And AAFC pegged Canadian durum production at 5.5 million mt, down 29%, thus tightening the global durum supply.
- Canada, the US, Mexico and the EU together produce about 95% of global durum. However, this year’s ending stocks are estimated at 10.7 million mt, 41% above the 5-year average.
- EU old crop barley premiums rose early in the week as Saudi shorts continued to look for cover, but this faded later. Black Sea Fob barley eased $2/mt. There were no changes in either Southern Hemisphere Fob or Canadian cash values and overall the barley market remained very quiet.
- Canadian barley remains uncompetitive in export markets and remains a domestic affair.
- On the consumption side, we remain persuaded that pulse consumption and demand in India has been very strong and above official government estimates. The strong import demand, especially for moderately priced peas appears to support this notion. If true, this will sustain import demand even following this spring’s harvest. We also expect world pea production to fall by 5-6% this year. This is assuming average yields for now, so watching growing conditions this year in the northern hemisphere will be very important.
- The next important news for the lentil markets is North American seeding and acreage of lentils. USDA predicts US lentil acres to increase by 13%; Canadian lentil acres could fall by 15-19%. A 20% drop in acres would lower production to ~2.8 million mt from 3.3 million mt last year.
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