MERCANTILE Blog: MarketInsight April 3, 2017

Marlene BoerschMarket Insight

trainlr

Major grains & oilseeds markets

There was nothing supportive in the USDA report. The stocks showed consumption to be less than expected in Dec/March, and the planting intentions were in line to slightly higher than trade guesstimates. It could be said that soybeans are overvalued compared to corn and wheat, but overall with increased production expected amongst other countries, we don’t look like having any shortage of supplies this crop year.

Where the markets go from here depends on weather during the planting and growing season in North America. Europe and the FSU appear to have come through the winter with crops in good condition.

Soybeans

  • The planting estimates and the production from the Southern hemisphere tells us we have too many beans to sustain current prices.
  • But for US farmers to cut soybean production, we would need to see soybeans drop about 75 cents per bushel relative to corn.
  • We could see the market drop 35 cents in the short term.

Canola

  • In week 34 farmers delivered 353,000 tonnes of canola, domestic consumption is said to have been 211,000 tonnes, and exports were called 170,000 tonnes. The visible is said to be 1.47 myn tonnes.
  • Canola remains well priced compared to other oilseeds for crushing, so demand continues to be good.
  • We expect to see the “basis” levels narrow in Saskatchewan, so we don’t need to anxious to sell any old crop stocks.
  • The USDA numbers make as more bearish on oilseeds in general.

Wheat

  • The USDA survey of producers showed that 46.059 million acres are estimated to be seeded to wheat in 2017, down 8.22% from a year ago. Winter wheat plantings are estimated at 32.747 million acres, while producers are estimating to seed 11.308 acres of spring wheat.
  • March 1 estimates of wheat stocks were a shade higher than expectations at 1.655 billion bu. Stocks are 17.1% larger than stocks last March.
  • US and EU wheat futures are historically cheap and the funds have extended their shorts, leaving the market increasingly vulnerable to any kind of weather problem. We will need to watch seeding and crop development in the Northern Hemisphere.

Durum

  • In the USDA acreage forecast, US durum acres showed up with more than over 400k acres less than last year. This represents a 17% loss in durum acres for the new crop year.
  • Algeria bought 200k mt of optional origin US/Canadian durum at US$250-253/mt, for May shipment. This sale equals about Cdn$6.00/bu delivered elevator Saskatchewan for a roughly #3 durum quality.

Barley

  • Per the USDA report, US barley acres are forecast to drop by 17% to 2.55 million acres. The biggest drop in barley acres is expected to occur in North Dakota.
  • Canadian barley remains uncompetitive in export markets 

Peas

  • Mercantile is staying with its forecast for a strong export performance this year. Excellent movement of peas off farm to date, recently improved pulse values in India, and good competitiveness of peas with chickpeas in India support our opinion on exports for 2016/17.
  • We also expect next year’s Canadian pea balance sheet to stay constructive.  

Lentils

  • Due disease and moisture forecasts, actual acres could be between the two scenarios around a 20% drop.  

 [If you are interested in more background intelligence and our supply & demand balance sheets, pls contact Mercantile]