Market Insight January 5, 2015

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Major grains & oilseeds markets

Last week was a shortened trading week once again and the markets, although slightly weaker, were not well defined and only lightly traded. This week is the first full trading week of 2015 and with most traders now back to work, we should have some better definition of market values.

During the Holidays, we did have some events that were worthy of note: Iraq purchased 100,000 tonnes of Canadian wheat at close to $300 USFMT FOB. The Algerian tender was again deferred and is now likely to occur sometime next week.

Soybeans – Soybean prices lost some value to corn over the holidays and are now at about the correct ratio considering the balance sheets. Demand from China has slowed and there have been no new sales registered with the USDA recently. However, with soybeans at fair value no, this should encourage some Chinese buying.

Canola – Deliveries of canola slowed down over the Christmas period and the visible reduced a little to 1.3 myn tonnes. The market has stayed quite firm and the tightness of supplies is being reflected in the inverses in the futures markets.

Flaxseed – We had some excellent bulk exports in week 20 amounting to 45k mt. The destinations are not clear yet, but we suspect that most of it went to China. YTD bulk exports are now 37% ahead of last years’ exports.

Wheat – The wheat market backed off somewhat since our last report; a firm US dollar has generally served to weigh upon the prices of commodities denominated in US dollar terms, and US export sales disappointed – despite that Russia has backed away from the export markets. The feature to cash trade was a purchase by Iraq of 200k mt; Canada sold 100k mt of that total at USF $331.65 per mt. The Americans would have preferred to have sold all of it themselves it appears. Cash trade is quiet otherwise; Algeria and Bangladesh tendered for some milling grade but that is about it.
Russia again dominated the news meanwhile. In an attempt to manage domestic price, it was announced they will begin charging an export tariff (read as tax) beginning Feb 1 of no less than 35 Euro per mt (equivalent to roughly $43), and also will impose a rail tariff to port of 13.4%. Domestic analysts have already cut back their Russian export estimates.

Durum – Durum prices at the elevator level in Canada have backed-off by roughly 50 cents per bu of late. In the US, bids for milling grade remain generally firm, but lower grades used for blending are beginning to fall out of favour. We expect forward global area to increase due price. The tight carry offers underlying support here for now, and fusarium risk in Canada may limit forward area here (and the high price of seed could limit acres as well). Otherwise the market inputs remain the same; good demand from North Africa (Algeria) and Italy versus tight global supply.

Barley – In trade TMO (Turkey) bought 26k mt (of likely Black Sea-origin) at $234.50 per mt C&F, for Jan. Though the Russian export tariff does not apply to barley, the rail tax does and that meant an undefined Black Sea price into the weekend. The other global barley markets were all surprisingly steady since our last report; Aussie price remains firm due that China’s persistent buying has left the domestic trade short there. Domestic Russian analysts cut their export estimates for barley; Russia has shipped roughly 3 myn mt and now has a 1.5 myn mt exportable surplus. The Canadian domestic price basis Lethbridge barley was slightly higher since our last report. Our view remains that Canadian-origin barley offers value to consumers at present.

Peas – There was very little market activity in special crops over the holidays, so there is not much new to report about sales or buying enquiries. FOB prices are therefore basically unchanged until we see new sales emerging, and so are country bids for now although the Canadian dollar weakened from .86 cents to the US$ just prior to Christmas to around .85 cents late last week. This change in our foreign exchange rate should support country bids by about 10 cents per bushel on peas.
Handling numbers for peas remain well ahead of last years’ numbers in spite of the roughly 9% smaller pea supply relative to last crop year.

Lentils – Red lentils have been supported by the continued shortfall in Indian rabi crop pulse seedings, which are still lagging by 11% from last years seeded acreage.
Handling numbers for lentils remain excellent with bulk exports 186 k mt ahead of last years’ bulk lentil exports thanks to excellent demand especially from India and Turkey.

Transportation – Railways have reduced Canadian railcar loadings and switched their equipment to loading in the US to PNW elevators. This has led to a reduction in export premiums in the PNW and has allowed for more US grain to go for export. Elevator companies are keeping the stocks on farms by reducing the amount they are carrying in primary elevators.

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