Major grains & oilseeds markets
It was very interesting week. Markets were much firmer following an unsubstantiated report that the USA government planned to change the Bio-fuel subsidy paid to processors to payment to the producers. In addition, none of the subsidy could be paid on imported bio-fuels. This rallied both soybean and corn futures.
This ‘news’ or rumor was then followed by a large purchase of wheat (535,000 tonnes) by Egypt. This rallied FSU prices and also required EU (French wheat) offers to fulfill the order.
Markets cooled a little by the end of the week when there was no confirmation of the bio-fuel change.
Weather was fairly benign and no real trouble sports were reported, although some are talking of a possible “El Nino” event and with little snow cover, a possible winter kill event.
In their last reports, Informa and other analysts predicted larger crops in South America than the USDA used.
- This market was very volatile during the week based on unconfirmed reports that the $1.00 per gallon subsidy paid on bio-fuels would be paid to the producer, instead of the refiner and that foreign bio-fuels would no longer be eligible for the subsidy. This was immediately seen as bullish US soybeans and the markets traded sharply higher. The report is still not confirmed and the decision would need to go through the Senate before any changes could be made.
- The market remains higher on the week, even though we don’t see any major difference, even if it is confirmed that the subsidy goes to the producer.
- Looking at the world balance sheets for oilseeds, we would see this as a selling opportunity.
- Through week 30, we now have usage at 11.764 myn tonnes compared to last YTD of 10.375 myn mt. We also hear that there has been some Oct/Nov shipment cargoes sold to the Chinese.
- Canola remains attractive to foreign buyers, especially when the oil share in canola is so high.
- Total railcar shipments during the week of all commodities was said to be a poor 505,000 tonnes. – When primary elevator stocks are stated to be 3.75 myn tonnes, this needs some explanation. The allocation is less than 14 percent of primary stocks, and 400,000 tonnes less than grower weekly deliveries. No wonder we have wide “basis” levels.
- EU supplies are running low just as Egypt (GASC) seems prepared to pay a premium for French wheat.
- Algeria and Saudi Arabia are expected to return to the market for EU (German) and Baltic old crop wheat.
- In the US, the Plains are dry, wheat acreage is record low, and wheat remains the one commodity where funds are still short (which they surprisingly increased last week).
- Durum exports during week 30 amounted to 118k mt and 2.4 million mt year-to-date. This is 15% or 432k mt lower than last year-to-date.
- The EU Commission forecast combined soft wheat and durum planted area at 26.3m hectares, down 1.8% year on year.
- The corn market rallied on the bio-fuel rumor, then futures declined as this was unsubstantiated. Reports of increased supplies from the Southern Hemisphere and cheap selling prices from the FSU kept cash prices under pressure.
- Given the hitch with India, we would say that the bloom of the pulse markets that we enjoyed over the past years is off. Prices will drift towards more normal levels, until a new overall shortage develops again.
- Nevertheless, overall volumes of peas already sold for this crop year have been excellent. We figure they could be as high as 3.5-3.6 million mt. This should be enough to ensure that ending stocks are not particularly burdensome! It also allows to start next crop year with an almost clean slate.
- India imported 34% of all lentils to the end of December, although the overall lentil volume shipped to India was down by 36% (277k mt) from last year to date. The further slowdown in exports now is reflected in both falling current crop and new crop bids.
- We do not expect current crop or new crop values to recover over the next while. We would need some very positive news or a major production problem somewhere to turn this market around.
- AAFC expects chickpea acreage in Canada to increase by 10%. We think a 15% increase is possible.
- Canaryseed exports remain 15% behind last year’s pace.
- Still growers are making some money and for next year, AAFC expects canaryseed acreage to increase by 5% to 272,000 acres.
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