Major grains & oilseeds markets
The month of June is generally a slow month in the markets as buyers seek to analyze the domestic market supplies before committing to imports and farmers look to see how their emergence of new crop looks. We don’t see this June being different although it should be noted that Specs already have a large short in Futures, which could bring volatility if weather conditions deteriorate.
There is a new WASDE report due on the 9th of June.
Specs and Speculative Funds are set for a bear market. They still have some selling power, but we don’t see them adding much until they see some positive weather.
- Record Brazilian shipments and very low prices for the Indian market (5 year lows) were the features keeping pressure on soybean futures.
- Crush margins in China are very poor and we hear of cancellations and some defaults on earlier higher priced oilseed purchases.
- We don’t see any reasons for soybean products to rally in the short term. The Wasde report could increase US bean production a tad.
- The visible has shrunk to 702,000, which means we must reduce the export pace or the crush plants will take an early shutdown if deliveries don’t improve.
- Basis levels have improved dramatically as we expected. Growers had the opportunity to sell additional canola on the November futures in excess of $500, and we know some of you did.
- Canola is not low enough to attract new crop cash buyers in volume at the present, so in our view canola is overpriced compared to soybeans.
- The Northern Hemisphere harvest lies ahead which will make further cash rallies difficult, but the world’s cheapest quality wheat continues to gradually get more expensive and quality will again be an issue this year with the Hard Red Spring Supply and Demand looking particularly tight.
- We could see further strength in Kansas and Minneapolis futures as the North American hard wheat market tightens.
- Canadian “basis” bids should improve as overall elevator stocks are reducing.
- Producers delivered 94k mt of durum into the handling system during week 43. Durum exports amounted to 39k mt; 3.5 million mt year-to-date. This is 9% or 363k mt lower than last year-to-date.
- Corn has little directional input – as evidenced by the CBOT’s low trading range.
- WASDE is next Friday, followed by the June 30th stocks and plantings report and the all-important July weather. There is some nearby strength in corn but provided July weather remains normal we have plenty of feed grain stocks in the world.
- US farmers are not going to sell much until they see corn off to a decent start, so futures will hold in. If we have normal weather longer term, then the Dec futures are too high.
- We do not think there is any need for further action by farmers right now. The initial forward sales have been made, and we are reminded that the combined pea imports (all origins) by Canada’s top three destinations for peas have risen by 77% (+1.9 million mt) over the past 4 years.
- Old crop is virtually done. As always, N/C will depend now on yields in Canada and the level of demand in India.
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