Major grains & oilseeds markets –
The markets were a bit firmer at the end of the week following heavy selling once again from speculative funds. They were again active in the markets selling close to 8 myn tonnes of futures, mainly corn and wheat. The futures did show some recovery from an oversold RSI and on thoughts that speculative funds are close to their short limit.
The next WASDE report is due on Tuesday; the trade is expecting no surprises in this report. We expect that the markets have put in their lows for now. As long as index funds hold onto corn, we normally get a run up in March to encourage additional seeded area.
Soybeans – The market is starting to pay some attention to the drought situation in Brazil; most thoughts are concentrated on the early harvest but as yet nobody has made any comments on quality. Early harvest is likely to mean lower oil content and small beans, so we need to watch the quality as harvest progresses. We may see some changes in Tuesday’s WASDE report. We expect USDA will reduce South American production a bit, increase US exports, and to slightly reduce the US carryover.
The new crop ratio to corn is more likely to promote lower seeding’s than an expansion in acres.
Canola – Producers reduced deliveries in week 26 and usage was good. Weekly exports were reported as 255,000 tonnes and the crush was 145,000 tonnes. We think the weekly usage numbers are understated. Visible stocks are 1.37 myn tonnes. Our week 26 balance sheet has the market carrying old crop futures against the crush and exports and basically says all your old crop seed is needed.
Flaxseed – December was a good month for flax exports with respectable shipments to China (51k mt), Belgium (65k mt), and to the USA (17k mt). YTD we are 22% ahead of last years’ pace.
Wheat – The wheat market was higher due dryness in Kansas and in other US winter wheat producing states, on a huge interest rate rise in Ukraine (that followed a plummeting domestic Ukrainian currency), and due talk of Russia taxing feed grain exports; the rallying $US provided much of the resistance. The StatsCan stocks report wasn’t really a factor for feed grains; though stocks were lower, they largely came in as expected by the trade.
Canadian wheat the equivalent of 3 CWRS quality is worth at least C$312.50 in store Vancouver. Unfortunately, Canadian interior bids are steeply discounted due lack of rail freight and a lack of elevator competition.
Barley – The Canadian domestic price basis Lethbridge declined $2.00 on the week. We suspect we are now at a point where what remains of available feed supply is spread so far out that it is now easier for large Canadian consumers to source/replace/blend their spring needs with imported corn.
Oats – 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. The cash charts look poor however, the outlook isn’t overly positive as of today.
Peas – We had good bulk pea exports of 40,300 mt in week 26 and bulk exports continue to run at 150% of last years’ pace. There are still 274k mt in the handling pipeline; we therefore expect export loadings to continue strongly for the next couple of weeks. Domestic prices are supported by both the expected tight stock situation and the weak Canadian dollar.
Lentils – Looking at exports, we know that we have been depleting lentil supply at a record pace. And according to the Statistics Canada stock report, lentil stocks as of December 31 totalled just 755,000 mt, the lowest level since 2008 and down 48% from last year. Given continued shipments, this means that lentil stocks will fall to levels that will require demand rationing via price.
Railway Performance – In week, 26 railroads only allocated cars equal to 20 percent of what was available to lift in Primary elevators.