MERCANTILE Blog: MarketInsight, Nov. 21, 2016

Marlene BoerschMarket Insight

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Major grains & oilseeds markets

The official US Thanksgiving Holiday is on Thursday, and this traditionally is a short week in the futures markets as most traders usually take Friday off in addition to Thursday. Volume will be light and we expect markets to trade slightly higher for the week. Last week fund trade reportedly was light, while the Chinese were active in registering cash soybean business with USDA. Cash trade in quality wheat was done at slightly higher prices. Rain is causing loading delays ex-Vancouver and is backing up railcars.

Funds – Index funds are either long all grains outright or are spread against some financial position. Specs appear to be outright long soybeans and spread long corn short wheat.

The currency markets continue to move around with the US dollar particularly strong.

Soybeans

  • The Chinese are buying US soybeans while the South American trade are reluctant sellers. We expect this will continue for at least two months.
  • Palm oil continues to have problems so we expect to see soy oil move higher.
  • US dollar volatility appears to be making South Americans particularly reluctant sellers.

Canola

  • Producers delivered 397,000 tonnes in week 15, domestic consumption was 165,000 tonnes, and exports were a very impressive 335,000 tonnes – which is close to a weekly record. Canola usage to-date is on par with last year. The visible supply was 1.6 myn tonnes.
  • Exports from Vancouver were said to be backed up due to rain delays, but we also heard that the Chinese last week were big buyers of December- forward shipments, which is good to hear and suggests the dockage incident is now behind us.

Wheat

  • The long-term US climate outlook implies an expanding drought across the US HRW Belt and parts of the South East SRW regions; not critical at this stage, but worth watching on the radar screen.
  • For now the world has no shortage of wheat as the Australian harvest is about to start.

Durum

  • The international durum market is tightening up: Firmer cash markets for lower quality specifications have started to support Canadian prices. It is helpful that there are reports that next year, the EU will plant 7% less durum.
  • The last major international trade was Algeria buying 300,000 mt.
  • The Canadian crop has a wide range of qualities, but the international market has shown recently that it will also accept #3 Canada Western Durum with minimum 60% HVK. Incidentally, this is roughly the equivalent of a #1 US Hard Amber Durum grade.

Feed Grains

  • The grains markets are just following wheat for the present.
  • US producers are well sold currently and appear to be prepared to hold for better prices, as high cost likely means fewer acres planted next year – if current prices persist.

Peas

  • Indian buyers are already expressing buying interest for deferred positions, which bodes well for the yellow pea market January 2017 forward.
  • We calculate that the volume of early sales and the fall shipment program is significantly lowering Canadian pea availability for the second half of the crop year.

Lentils

  • Prices remain very firm here in Canada. The late harvest losses and grade losses have taken a toll on availability and producer willingness to sell.
  • As discussed earlier, decent green lentils will stay very tight this year, while red lentils stocks are more relaxed. We think that the bulk export movement could slow once forward sales are serviced, so prices offer some good opportunities to producers.

Chickpeas

  • The chickpeas harvest was an epic struggle, and it still is not clear if all will be harvested. Most of the quality is more than questionable, but the saving grace has been interest by the U.S. pet food industry in off grade chickpeas.

Canaryseed

  • Canaryseed prices have finally firmed up and $24/cwt fob farm Saskatchewan is bid.

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