MarketInight November 10, 2014

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Major grains & oilseeds markets –

The cash markets were very slow last week while buyers waited to see what the USDA WASDE report has to offer this Monday. However, funds and speculators were very active in the futures during the week, buying close to 9 myn tonnes, a big week. The spec funds have now moved to the overall long side of the market and we expect they will buy more, particularly on any breaks. The futures closed slightly lower on Friday due to increased hedges.

Soybeans – Crush margins for soybeans remain extremely good, particularly in the US and China. We suspect that there has been a lot of Chinese buying recently, most likely done by the offshore companies of the US multinationals in order to avoid USDA registrations. They will come out in due course.

Canola – There already is quite a high volume of canola seed already committed to exports, so canola can remain at a product value to soybeans that rations additional sales. In fact, we expect the premium to increase going forward. We also expect “basis” levels to firm, to go to a premium to futures, and expect futures inverses to increase. There is no open interest in November Winnipeg futures, all trading is now basis the January.

Flaxseed – Flaxseed is finally starting to move through the system. We had a good 42,100 mt of flax delivered by growers during week 13, and 7,900 mt were exported. This puts YTD exports at 33,800 mt versus 41,000 mt last year. There are still 68,200 mt of flax in primary elevators, and 12,800 mt in Thunder Bay. This is the start of the fall export program to Europe. There are also 18,900 mt of flax in-transit to the Pacific Coast for China.

Wheat – In their monthly Cereal Supply and Demand Brief, FAO put 2014 global wheat output at 722.6 myn mt versus 718.5 myn previously; ending stocks declined by 200k mt versus Oct to 192.2 myn mt. They pegged global 2014 cereal grains production at 2.522 byn mt versus 2.523 byn previously; 2015 cereals ending stocks were pegged at 624.7 myn mt versus 627.5 myn last month. However, there seem to be some friendly inputs as well, with smaller forward crop estimates, trade chatter about weather problems in the FSU, and reasonable demand. We do not see much change in world prices in the short term, but we do see the premium for hard quality wheat to be maintained.

Durum – Low global carry-in suggests underlying support and we believe 14/15 global carry will once again prove historically tight. Prices paid for lower quality have improved.

Barley – The Lethbridge barley quote increased another $1.00 per mt on the week. We think that Canadian-origin barley offers value to consumers at present against the backdrop of a potential modest improvement to corn prices over the coming intermediate period (as low price may discourage forward corn area).

Peas –
Looking at recent loadings, week 13 was another excellent bulk export week with 81,700 mt loaded onto vessels, mostly heading to the Indian Subcontinent (India and Bangladesh). In spite of that, terminal elevator stocks at the West Coast are still high at 65,600 mt with another 50,900 mt en route heading their way. This means that there will be at least another 4 vessels filled with peas over the next month or so.

Lentils – Lentil demand has been nothing short of excellent and Canada again had a strong bulk export shipping week 13 with just under 40,000 mt of lentils loaded to bulk vessels. Lentil exports will be front-end loaded, taking stocks off the market early on. This is supportive to strong prices in the latter half of the crop year as stocks will not be burdensome going into the spring months.

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