MarketInsight April 6, 2015

Marlene BoerschMarket Insight

Major grains & oilseeds markets –

The USDA Grain Stocks and Prospective Plantings report last Tuesday pointed to larger than expected corn supplies and smaller than expected soybean supplies. March 1 corn stocks were pegged at 7,740 billion bushels, 11% more than last year and 130 million bushels more than expected. Soybean stocks were estimated slightly lower than expected at 1.33 billion bushels but still but 34% more than last year’s low levels. USDA estimated 89.2 million acres of corn would be planted; this is 1.5% lower than last year but 460,000 more acres than expected by analysts.

The USDA report on wheat came in below trade guesses for both stocks and acreage! There was an initial negative reaction, but then the market rallied on index money in-flows, ongoing dryness in the Plains and fund short covering. There were also late week reports of renewed Brazilian interest in US HRW.

Soybeans – The beans gained roughly 19 cents this past week, and the products (oil and meal) also posted gains as well. The USDA NASS report forecast record 2015 US acreage, so the fundamentalist traders do not expect there to be much upside available here. The futures rallied however on fresh commodity fund money inflows as it was the beginning of a new fiscal quarter.

Canola – Gower deliveries of canola into the elevator system remained big at 241k mt, but the visible finally dropped a little to just below 1.6 mln mt thanks to good export loadings at 219k mt for week 34. Domestic crush was a little lower than last week at 146k mt. – We have had four weeks of heavy grower deliveries now, but this will slow as we get into seeding mode.

Flaxseed – At 401,000 acres for 2015, U.S. flax acreage is forecast up by 29% over last year. The big increase is in North Dakota, where an additional 965,000 acres are expected to be seeded. Given this acreage, we project U.S. flax production to increase to about 195,000 mt from 161,750 mt. This would be a 20% increase and may affect Canadian flaxseed exports to the U.S.

Wheat – US wheat rose 20-30¢ with CBOT making its highest weekly close since January 9th. However, US exports were below expectations, crop ratings were surprisingly mostly unchanged or better than last week (and most states remain better than last year), and the trade believes that final spring wheat acres will eventually go higher, but the final arbiter – at least for this week – was the dry outlook for the Plains and the still near record fund short.

Durum – USDA NASS put intended US area seeded to durum at 1.647 myn ac, 18% above 2014 but came in slightly below the trade estimate of 1.7 myn ac. Durum stocks were put at 37.6 myn bu, 1% below last year. The Dec/Feb 2015 indicated disappearance of 6.43 myn bu is down 59% versus the same year-ago period.

Barley – Canadian barley does still offer value to our domestic consumers in our view, though it is difficult to source old crop at present as supply is tight. The Lethbridge price increased by $7.00 per mt this past week and that reflects localized cash market tightness, in our view. Looking forward, we expect we’ll see increased Canadian barley area this season.

Oats – We continue to expect that both area and resultant output will increase this season. StatsCan will issue 15/16 planting projections on April 23. The market fundamentals themselves look fair, and oats at least have a lower cost of production working in their favour. Cash prices for oats when denominated in Canadian dollar terms make our oats attractive to US millers, so forward demand will be relatively good from that region.

Peas Peas finished the week on a mixed note because of the stronger Canadian dollar late this week. On the other hand, the strength of new crop red lentils on Friday should give pause as this is most likely based on volume new crop buying interest by India. – This could well develop into a broader support for pulse prices and could involve both old crop and new crop yellow peas.

Lentils – We reported steady demand for new crop lentils last week, but this week the big surprise is the jump in price by some exporters for new crop reds from $26 to $30/cwt for DD’s (not for production contracts with an AoG). We also note that Australian prices for lentils took another jump, supporting our view that something is happening in India.