MarketInsight April 13, 2015

Marlene BoerschMarket Insight

Major grains & oilseeds markets –

There was very little in the USDA WASDE report that presented any surprises to the market. We now await the May report – which will include the forecasts for 2015/16 crops. Trade was choppy and quite light in the futures markets. The RSI’s are all in neutral territory, reflecting an undecided market. In the cash trade the Saudis were quite active buying EU hard wheat at sharp discounts to North American origin for June-August shipments.

The markets are currently difficult to predict. To be bullish we need some significant weather events that affect the yield of the new crop, or some significant new demand to clean up the large carryover stocks. If the weather continues to cooperate, the markets have some downside from here.

Soybeans – The WASDE report did not reveal any surprises for oilseed traders; the numbers continue to suggest a bearish outlook.

Canola – Producers delivered 294,000 tonnes of canola in week 35, exports were 243,000 tonnes, and domestic usage was 141,000 tonnes. Visible stocks were reduced to 1.4 myn tonnes, with a low 912,000 tonnes in primary elevators. There was some heavy buying of May futures on the 10th and we are surprised that this could be accomplished in such a narrow range.

Wheat – USDA report highlights: Global output was increased to 726.45 myn mt versus 724.76 myn in Mch; consumption increased by 1.3 myn mt during the period. Global 14/15 ending stocks declined by 500k mt versus Mch – to 197.21 myn mt versus 197.71 myn previously. This was yet another pedestrian USDA report for wheat. The data is iffy in that they claim an increase to consumption but do not display from where it supposedly came.

Heading into the 2015 harvest, the US, EU and FSU have a combined 15-myn tonnes of additional stock cushion compared to a year ago. Therefore, with new crop positions already trading basis normal weather/Russian politics, the path of least resistance seems negative.

Durum – StatsCan’s prospective area estimates are to be released Apr 23; per the Reuters survey, analysts expect Canadian durum area this season to come in at 5.3 myn ac (range 4.9/5.6 myn), 100k ac above the previous poll and 550k ac above the actual last season. This will prove an interesting estimate number; current new crop price may limit the extent of the gains as in our view many producers have been disappointed by the cut to price versus old crop.

Barley – China raised Oct 14-Sep 15 barley imports by 800,000 to 6.6 myn tonnes, and put imports of DDG’s, sorghum and barley combined at 18.6 myn tonnes. French non-EU exports rose to 2.1 myn tonnes, 40% ahead of last year’s 1.49 myn tonnes with China alone accounting for 1.47 myn tonnes this season. Ukraine Jul-Mar barley exports rose to 4.3 myn tonnes. Canada’s participation in this China trade was negligible.

Oats – StatsCan will issue 15/16 planting projections on April 23; per the Reuters survey, analysts expect Canadian oat area this season to come in at 3.1 myn ac (range 2.8/3.3 myn), 100k ac above the Feb survey and 302k ac above the 14/15 actual.

Flaxseed – Canadian flaxseed acreage has been recovering since its recent low of 740k acres in 2011. It is forecast up another 11% from last years’ 1.6 million acres to 1.73 million acres this year.

U.S. flax acreage is also forecast up by 29% over last year to 401k acres. Given average growing conditions and yields, North American flax production should exceed this years’ by 160k mt.

Peas We finally had some decent bulk export loadings again over the past two weeks with 18,100 mt for week 34 and 49,700 mt for week 35. Including the past 2 weeks, total bulk exports YTD are an impressive 484,000 mt (or 39%) ahead of last years, and domestic disappearance is almost triple last years’. We did see some firmer new crop bids in Alberta and Western Saskatchewan last week in response to the continued bad news about the Indian rabi crop, but there was not follow through further east. – Again buyers seem to be adopting and wait and see attitude. – As producers, we would the same for now.

Lentils – At 30,400 mt, producer deliveries of bulk lentils into the elevator system were bigger in week 35 than for peas, flaxseed or oats. Producers certainly did respond to some premiums paid by elevator companies. Actually, grower deliveries of bulk lentils into primary elevators are now 40% or 200k mt higher than last year.

Transportation – We would need exports of 1.2 myn tonnes per week to equal AAFC’s export forecast of March 21; it is not going to happen given railcar loadings since Christmas.