MERCANTILE Blog: MarketInsight, Oct. 31, 2016

Marlene BoerschMarket Insight

Rain_Prairies

Major grains & oilseeds markets

The markets closed slightly lower on Friday, but cash trade in wheat was quite good and global cash prices increased slightly. Weather in South America is beginning to become a concern, with too much rain being reported. This will take a more significant role on the radar screen if current conditions continue. Harvest conditions in Canada are problematic with a lot of grain and canola still lying in swath and some will likely remain there until the spring. Funds reportedly did very little except they were good buyers of soybeans and sellers of wheat.

Funds – Index funds reportedly added to their long by purchasing more soybeans and corn, while speculative elements sold wheat and bought beans and oil.

The US dollar and oil traded a bit lower while copper was an erratic market in thin trade. The weaker dollar is helpful to commodities but we cannot see the outside markets as having any significant effect to our markets in the short term.

Soybeans

  • We had heavy registrations with the USDA last week; primarily sales to China. We expect more this week.
  • Funds did some more buying so it remains tough to sell the bean market. – We still need record producer selling through December. – We don’t see the weather as being too good in South America and all cash demand remains for US beans for the present.

Canola

  • Producers delivered 447,000 tonnes in week 12, exports were 198,000 tonnes, and domestic usage was 182,000 tones, giving us a healthy visible supply of 1.6 myn tonnes.
  • Chinese demand remains sporadic due to continued delays in their issuance of import licenses. Hopefully this situation will be resolved shortly or we will need to lower our Chinese import estimate.
  • More canola is being railed to Thunder Bay, so EU demand is clearly healthy.
  • The markets are beginning to recognize that there is no quick solution to the tight palm oil stocks – and this will help high yielding oilseed crops like canola.

Wheat

  • We are still just 4 months into the 16/17 season and the quality wheat market appears to have bottomed out, with the Aussie harvest delayed, rain needed in the US Plains and soil moisture low across much of the Black Sea and Europe – quality could deteriorate further.
  • The funds reportedly added 21,000 to their wheat short last week which could be vulnerable as futures.

Durum

  • A sizable portion of Canadian durum should prove above the EU 1.75 p.p.m. vomitoxin threshold. Tough samples will prove difficult to market, and expect exports will mainly be done at #3 qualities; the poor samples with high vomitoxin levels may prove worthless even as feed, though quality samples as noted should carry significant demand.

Feed Grains

  • US corn is the cheapest in the world and is finding good cash demand; the carry charge in futures is telling US the producer not to sell the crops; the EU and Black Sea have issues, but without a real South American weather problem as yet, the world has no shortage.

Peas

  • The positive edge in the yellow pea market is driven by new interest and anticipated new buying interest from India because of the very big spread between yellow pea and chickpea values and the weak Canadian dollar.

Lentils

  • The market is seeing buying interest for greens from the Middle East/ North Africa, and especially Algeria. There is also buying interest from South America for large greens. There were no buffer stocks left in the market anywhere at the end of the last crop year, so most buyers are pushing for quick delivery.
  • Difficult qualities slow processing/ cleaning of lentils and exporters are having trouble keeping up with sales commitments. Add the idiosyncrasies our handling and rail system, and this is adding fuel to the nearby markets.

Chickpeas

  • 75% of Saskatchewan and 10% of Alberta chickpeas are still in the fields. Given current conditions, this is a disaster for the crop. Much of the crop may end up as livestock feed, which unfortunately will be another problem for the popularity of the crop, just when we are getting improved varieties.

Canaryseed

  • Per SAF, harvest in Saskatchewan has progressed to ~ 50%, as of Oct. 24th, 2016 (up 4% over the past two weeks). Canaryseed is a hardy crop, and quality worries are less here than for grains, oilseeds and pulses.

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