MarketInsight March 23, 2015

Marlene BoerschMarket Insight


Major grains & oilseeds markets –

The US Dollar Index dropped sharply on Thursday and was seen to be constructive on futures prices. Prior to the dollar weakness funds were aggressive sellers of futures on the week, selling both corn and beans. The dollar weakness appeared to catch the funds by surprise and it will be interesting to see what the US dollar does next week. It is still at 11-year highs, which in our opinion is too high.

Soybeans No real changes in the balance sheets. The trucking situation in Brazil is proving tougher to resolve than first thought. Premiums are quite firm. There are a wide range of estimates on expected new crop planted acres and the markets are waiting to see what USDA estimates in March. Informa’s number is bearish which is to be expected considering who their major customers are; consumers. We see downside on the old crop ratio; the new crop corn/soybean ratios are where they should be.

Canola – Canola weakened a little relative to soybeans due the stronger Canadian dollar; however, we understand there are still export buyers around. Open interest in futures continues to be focused in the May and July months open interest in the November is relatively small.

Flaxseed – YTD flax exports (to the end of Jan.’15) are 26% ahead of last year’s exports to date. Exports to China, Belgium (EU) and to the US comprise 94% of all export shipments. There are almost 93k mt of flax in the handling system, including 10k mt in Thunder Bay, and 64k mt in primary elevators, so given the railroads start moving some grain again towards the east coast, we will see another bulk shipment to Europe after the opening of the St Lawrence Seaway. Railroads have not been allocating any railcars to go east for weeks now!

Wheat – US wheat rose sharply on increasing concerns over dryness in the Plains and Russia, fuelled by a near record large fund short. Winter wheat rating updates fell but remained above last year, while the abrupt change to very warm temperatures in the north brought talk of spring wheat planting before the end of March, which limited the gains in Minneapolis futures.

Barley – We cannot confirm but there were rumors that Saudi bought new crop at around $200 C&F. his would be a very cheap price compared to old crop offers, which are around $200 FOB Black Sea/EU.

Oats – AAFC estimated 15/16 area seeded to oats will increase by 10% to 1.25 myn ha (1.132 in 14/15), due price and reduced fallow area. Output was forecast to increase by a corresponding 10% to 3.2 myn mt (2.908 myn in 14/15). Supply was expected to grow by 2%. Usage to fall 7% due mainly lower feed use (human consumption is flat). Exports estimated to increase 1% to 2.2 myn mt. Carryout to increase 15% to 950k mt.

Peas The recent export pace on all commodities is raising concerns. On peas, we are still 44% ahead of last years’ pace with bulk exports, but as the graph showing monthly pea export numbers into January reveals (Jan.’15 StatsCan export numbers came out last week), the monthly shipping trend clearly is downward.

Lentils – Both Canadian and Australian producers are set to plant a lot of acres with red lentils this year, and -given good weather conditions- this could develop into to a very large supply base. – The one question remaining is how much the Indian buyers will keep buying in the meantime.

Transportation – Continues to be poor: the railways only allocated 515,000 cars in week 32 – moving only 18 percent of stocks held in primary elevators. Primary elevator stocks continue to climb; “basis” widen. At the current pace, there is no way the AAFC export projections will be achieved in the next 20 weeks.