MarketInsight Jan. 25, 2016

Marlene BoerschMarket Insight

Major grains & oilseeds markets – The futures markets showed strength in wheat/corn a bit weaker in soybeans. The IGC reduced its corn estimate to 959 myn tonnes for 2015/16 from their previous estimate of 967 myn tonnes, which helped strengthen corn futures. Loading delays in South America is bringing more demand to the US. The IGC added 1-myn tonnes to their soybean estimate of 322 myn tonnes but also increased consumption by 2 myn tonnes also to 322 myn tonnes.

Speculative funds were good buyers for the second week; they have reduced their overall short by 12 myn tonnes in two weeks. It was a surprise to see the index funds sell some corn. We expect to see the spec funds to continue reducing their short in the coming week most likely in wheat.

Soybeans – There was nothing new in the market this past week. for the most part they followed other grains even though funds were good buyers. The soybeans look underpriced on the ratio for old and new crop compared to corn, and we expect to see stronger soybeans this week.

Canola – Producers delivered 343,000 tonnes in week 24, domestic usage was 169,000 tonnes, and exports were 236,000 tonnes. Year-to-date usage is close to 1.5 myn tonnes above the previous year. The visible stocks are shown as 1.43 myn tonnes, which is reasonably comfortable for now. We increased our expectation of the years crush number to 7.8 myn tonnes considering how much has been achieved year to date and also the current very competitive pricing of canola to other oilseeds. Canola continues to be extremely competitively priced for crushing compared to soybeans. At these levels, demand will remain strong.

Flaxseed – Bulk exports to Asia continue to lag last years’ pace.

Wheat – The Grains Council increased its 15/16 global wheat output estimate to 731 myn mt versus 726 myn in Nov and versus 725 myn mt in 14/15. The 15/16 ending stocks were raised to 213 myn mt versus 208 myn in Nov and versus 201 myn in 14/15. They estimated forward 16/17 global output 3% lower on the season to 706 myn mt, due lower area and yield.

Durum – Morocco was working a sizable tender for 315.0k mt of optional-origin durum for Mch/May, and offers were due Jan 5; we suspect this has been cancelled. During the past week, Tunisia meanwhile tendered for and bought soft wheat and barley; Tunisia usually also seek durum at their large tenders, but they did not this time. Durum-related global weather was a mixed bag; rains eased drought on the Iberian Peninsula – which surely aids Spanish Med crop prospects, and also per the USDA/NOAA weekly weather update, severe drought continued in Morocco (a durum consumer), though rains eased drought conditions in Algeria (another durum consumer).

Barley – For price reference, our competitive FOB cash export indications at present suggest current global FOB values for Feb of $165.00 for French/EU, Black Sea $175.00, West Aussie barley $180.00, and Argentine at $170.00 asked.

Peas Grower deliveries of peas continue to slow as stocks are being drawn down. This is in spite of targeted bids as high as $13-13.35/bu (at high volume elevators finishing off unit train loads). – Perhaps mostly the firm holders of peas are who primarily has something left to sell.

Lentils – The drop in lentil values we alluded to last week continued and we have seen some of the old and new crop values drop by $3-7/cwt.  However, there is limited downside to the current crop lentil market until new crop lentils enter the markets. The first crop to appear will be primarily red lentils from Turkey in June. The next sizeable supplies will be from Canada, starting in August. Australian new crop lentils will not enter marketing channels until November/ December ’16.  Lentil markets will stay strong into the winter of 2016, but it is hard to tell what exactly the price levels will be.

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