MarketInsight Oct 20, 2015

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Major grains & oilseeds markets –

Markets found some support last week on

  • reports of adverse Brazilian weather,
  • good export numbers out of the US,
  • delayed harvesting in the US,
  • primarily due short-covering from large speculators, and
  • concerns about indications of potential recession as rumors of a slowdown in world trade circulated.

Large speculative funds and large speculators bought in close to 6 myn tonnes of their short position during the week, which helped the futures markets higher. The key to market direction is whether funds continue to buy or back-off.

Cash business was restricted during the week, with only some wheat traded to Turkey reported.

Soybeans – The strength in meal and the weaker oil has improved crush margins on soybeans. Margins in China are now very good and we expect China to start buying soybeans shortly.

Canola – The weakness in oil and the strength in soymeal have made canola uncompetitive against soybeans due to the higher oil content in canola versus soybeans. The crush margin on canola is poor compared to the crush margin of soybeans. However, sales through January are good, so we need good deliveries. From the rate of weekly deliveries, it seems producers took the opportunity to sell forward. We therefore would not see any necessity to sell additional tonnage at present.

Flaxseed - August flaxseed exports were reported at 36,882 mt, more than double last years’ August exports. However, contrary to AAFC who forecast flax exports for the crop year to reach 800k mt, we expect to export ~640k mt this year. Last years’ flax exports reached 615k mt.

Wheat – The numbers have not changed much as there is ample wheat around. Short-covering of futures has been supportive to the market and funds still have more to do with some very good profits remaining on the table. Quality wheat remains in short supply and offers reflect a strong premium. Canadian elevator bids have improved but remain at a huge discount to world price values.

Durum – As we expected, prices paid for lower quality have begun to improve. Looking forward, note the expected 2015 EU area increase forecast by Strategie Grains.

Barley – There continues to be big trade in Aussie barley to China at prices around $215 USFMT. China has the potential of being the world’s biggest feed barley buyer this crop year.

Peas – Values for yellow have moved up a touch and movement remains steady. Watching longer term, it pays to pay attention to the pea balance sheet by type of pea again this year. Yellow peas definitely have the biggest demand base and are moving in style this fall. India and Bangladesh alone took 150,000 mt of peas during August, the only month we have official export statistics for so far. We expect that yellow peas will be tight later this year.

Lentils – Shipping is brisk, and plants are booked forward into November. At 139,150 mt for the month of August, export statistics for lentils were good exceeding last August by 37k mt (36%). The biggest destinations have been India, then Turkey, followed by the UAE. India and Turkey take bulk product.