Major grains & oilseeds markets
Markets continued under pressure from Fund selling and additional aggressive cash selling from Russia and the former FSU. We don’t see any change in this pattern while- we approach the main US harvest pressure.
Funds: Spec Funds were good sellers on the week. We continue to believe that, in the short term, they will go to a 50 myn tonnes overall short.
Index Funds have done nothing and have lost a substantial amount of their equity from the profitable position they were in a month ago.
- We uncovered some Chinese bean buying at the end of the week, which helped to steady Soybean futures.
- Longer term, we remain negative on soybeans and see December futures testing the lows at $9.25.
- The Pro-Farmer tour estimated the soybean yield at 48.5 bpa compared to the USDA’s 49.4 bpa, which we don’t think does much to soybean futures.
- The IGC raised their estimate of world production by 2 myn tonnes to 347 myn tonnes. This provides adequate supplies.
- In week 3, growers delivered 130,000 tonnes of canola, exports were 96,000 tonnes and domestic usage was 101,000 tonnes. Vessels in the Vancouver lineup are waiting for canola, which is the reason the export figure was so low. The visible stocks show 556,000 tonnes which is extremely tight, but with new deliveries starting to come in, should be manageable.
- “Basis” levels have improved a little and will continue to do so if growers are selective on how they deliver. – Make no un-priced deliveries (or effectively free stocks to the elevator company). – Make the elevator company pay – they need the supplies.
- We see no reason to sell additional canola at this time.
- The cash wheat market remains complex regarding quality, however one thing is clear: There certainly is no shortage of wheat around.
- The total available supply now depends on logistics – notably the availability of rail cars and transport to export locations. Russian wheat exports will have difficulty getting more than 30 myn tonnes out, and Canada so far shows no evidence of wanting to ship more to meet demand, rather than allocate railcars to be in accordance with what the elevators/RR want to ship. However, there seems to be more than enough supply to meet milling demand.
- Feed Wheat is already taking feed demand away from corn.
- Cash durum is currently at $8.00 per bushel; values have declined from $9.25 over the past week.
- While the jury is still out on the actual yield of SK durum, we are somewhat bullish and would not advocate selling #2 CWADS below $9.50 per bushel.
Barley/ Feed grains
- There is no shortage around. Corn will follow cheapest wheat.
- Canada is falling behind last year’s export pace off the combine, but producer deliveries of peas have started to speed up during week 3 (188k mt). This is easing some of the immediate supply shortage. Farm bids have strengthened on low inventories at elevators and processing plants against good forward sales. Having said that, fresh demand/ overseas sales are hard to come by for now.
- We expect new demand to pick up over the winter months.
- Large greens- Due to last year’s questionable quality of large green lentils, there has been penned up demand for good quality large greens, and this is keeping prices high at ~Cdn.$45(+)/cwt delivered plant. (Prices vary somewhat on colour from $42 to $47/cwt delivered plant. Large sized lentils may earn another $1/cwt). We think these are good sales levels for greens and (given decent yields) would add to our green lentil sales to be up to 2/3 sold.
- Most small greens seem to grade a No. 2 Canada. While quality is very uniform with few blemishes, the colour is somewhat tanned or pale. Still, the takeaway here is that we will have more good quality tonnage to bring to the market than last year.
- Reds- Early contract prices for red lentils were done at $40/cwt at the start of the season, but prices for reds dropped progressively to today’s value of $23/cwt. We expect red lentil demand to remain relatively slow into the winter.
- There currently is demand for large greens; less so for small greens; reds will be quiet until some of the bulk product has been used on the Indian Subcontinent.
- No harvest activity in Canaryseed. Crops in the southern half of the province look poor.