MarketInsight December 1, 2014

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Major grains & oilseeds markets

Last week was quiet as the US Thanksgiving holiday caused a shortened-trading week in the futures markets. The market was effectively closed from midday on Wednesday until Friday and many traders took the opportunity to take a long weekend off. The markets were thin and a bit erratic and generally maintained their levels.

Wheat was strong on short covering and on weather concerns in Eastern Europe/FSU.

The export sales of corn for the week were put at a strong 1 mln tonnes, soybeans were 1.5 mln, and wheat a respectable 500,000 tonnes.

The OPEC meeting last week was very significant and in our view, it’s effects have yet to be factored into the markets.

Soybeans – Weekly export sales were very good and will continue strong, as there is very little alternative competition to US beans until next March. Most of the old crop South American beans are now committed to the crush. Registrations of US sales with the USDA were also very good for a short week and we expect good registrations in the coming week too.

Canola – There were no significant features to this market. The Canadian dollar weakened again following the OPEC meeting and we did hear that some canola traded to Pakistan; it is reported they bought 150,000 tones. Prices have not been reported but we expect the level to have been around C$90.00 over the March.

Flaxseed – Canada exported another 29,600 mt of bulk flax through export terminals last week. 10k mt were loaded at the West Coast for China, and 18k mt were loaded in Thunder Bay for Europe. Unfortunately, the bulk program to Europe will come to a close soon with the close of navigation for the season in Thunder Bay. There are still 13,800 mt in the Thunder Bay terminal for pick-up next week.

Wheat – The wheat market closed modestly higher on the week, and these were good gains considering the carnage occurring in the outside markets (broadly lower crude oil); this selloff also impacted the oilseeds and corn as well due their allied energy market connection. This support to wheat price was derived due the the weather/crop issues in the Black Sea region, the brisk pace of EU and Black Sea cash sales, and resultant allied questions about when that brisk pace of EU and Black Sea export sales will decline.

Durum – In cash trade, TMO (Turkey) tendered a few weeks ago for 60k mt optional-origin durum, for Dec/Jan; TMO bought 50k mt optional, with 25k mt trading at US $529.00 per mt C&F and 25k trading at US $513.96. It may have been EU-origin as the tender terms aligned with Spanish-origin quality. Turkey has since bought 100k mt Dec/Jan at $515/ $540 (the specifications were low and close to a 3/4 Canadian grade). TMO this past week issued a fresh tender seeking 27.5k mt optional durum for with a deadline of December 11 (valid until Dec 12), for Dec/Jan.

Barley – Short covering by EU cash traders supported EU price in Nov, as did Chinese demand for barley. French quality is poor and as such once again Scandinavian barley is providing the bulk of quality domestic EU supply. China has been buying lower grades of French-origin winter crop to bridge until Aussie supply is available, but Aussie quality will prove widely variable due drought in South Australia and Victoria. The Argentine crop it appears will be late and their domestic economy is horrible, so they may prove unreliable this season as such. China in our view remains the featured buyer of both feed and malt grades, and we see them still seeking barley through the first half of 2015 and perhaps forward as well.

Peas – Looking at shipments, Canadian exporters loaded another 44,200 mt of peas onto bulk vessels at the West Coast, and with that moved ahead of last years’ bulk shipments by an amazing 400k mt, or 52%. YTD producer pea deliveries have reached 1.4 million mt. This is ahead of last years’ by 370k mt, or 35%.

Lentils – Bulk lentil shipments were small last week (4,300 mt), but there are another 13,000 mt in store Vancouver, which will load before Christmas. YTD, bulk exports are double last years’ pace. The prolific bulk lentil shipments to the Indian Subcontinent have been a god-sent, as they have moved a lot of mediocre product off the market. We cannot see the lentil market dropping significantly. Demand has been excellent and until India solves its supply problem not much will change.

Transportation – Assisted by the rail legislation calling for 1 mln mt per week, producer deliveries this year are very significantly higher than last years’. As of Dec. 1/’14, the rail legislation has been extended, but with a smaller volume requirements: Railways now have to move between 200k and 465k tonnes/ week each depending on the time periods between now and March. So while there still be grain volume targets, the new mandates are about 500,000 tonnes lower than producers have been delivering per week crop YTD, and they now will allow elevators to widen their “basis” levels and allow railroads to put more cars to the US.

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