MarketInsight March 2, 2015

Marlene BoerschMarket Insight

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Major grains & oilseeds markets –

Trucking problems in Brazil rallied oilseed prices, which helped prices in both corn and wheat by extension. Egypt bought some US wheat, which was a first for a long time. GASC’s purchase was probably due to the availability of US credit rather than prices. – Otherwise the market’s attention is now focused on the new crop with a range of opinions on acres to be planted and on winter crop conditions.

Soybeans – The Brazilian trucker strike still has some roads blocked as truckers seek better terms from the government. Chinese purchases from the US of 27.47 mln mt are approaching the 27.6 mln mt purchased from the US last year, and 2.08 MMT of outstanding sales to China remain to be shipped. Spec Funds added 3.1 mln mt to their soybean position during the week. The average closing price for November soybean futures during the month of February turned out to be about $9.73; this is $1.45 per bushel below 2014.

Canola – In spite of the extremely low railcar allocations throughput the grain system, weekly canola export shipments have picked up over the past two shipping weeks and YTD exports remain 428k mt (or 10%) ahead of last years’ pace. At 652k mt, canola crush has also been strong in January and we expect a strong average 652k mt crush for February through to July ’15. Such good usage numbers will keep the canola balance sheet tight.

Wheat – The big picture has not changed, and the US, South America, and Ukraine will continue to fight over the export pie for the next few months. While corn will not have a real story until the March 31 stocks and plantings report, wheat will struggle to go down much from current levels.

Barley – Barley will continue to trade at a $20/$30 premium to corn.

Oats – Oat futures rallied this past week, finally, as they eased oversold conditions somewhat. As we noted a few weeks back, what the sloppy action on the cash and futures charts then was likely telling us is that oats (and grains in general) probably need to rally right now to draw area. However, the forward outlook on the charts isn’t overly positive in our view.

Peas For new crop peas, there is some uncertainty about overall increases in pulse acres in Canada, the US, the EU, Australia and in Black Sea countries. At least ending stocks will be low everywhere going into the New Year. $7.75/bu is still being paid for new crop yellows in Saskatchewan.

Lentils – Not much fresh input here.   AAFC made a small 5k mt downward adjustment to their 2013/’14 ending stocks that carry through the following years, but that is not significant. For next crop year, they still project an 11.1% increase in lentils acres over last year and a somewhat more relaxed carryout at 170k mt (45k mt this crop year).

Transportation – Only 416,200 mt of grain/ oilseeds were moved west last week. That is the equivalent of 4,623 railcars. During the fall, we moved as many as 13,700 railcars per week. And you wonder why basis levels are widening? Look at CP and CN performance.