Major grains & oilseeds markets –
The markets suffered from a general malaise, as dealers/traders did not feel inclined to hold large positions in the current economic and volatile world climate. Old crop markets are just about covered except for some fill in cargoes; traders’ attention will now be focused on events affecting the new crop.
There is a new WASDE report due on Tuesday; we do not expect anything dramatic but we do expect the USDA to increase corn and soybean exports for 2014/15, which will slightly reduce the US carry-in. There should also be reports concerning the Brazilian truckers meeting that is scheduled for Monday/Tuesday, also a CONAB report on the Brazilian crop.
Soybeans – Last week’s rally was a “dead cat bounce” and the markets have come down to reflect more in line against ratios based upon supply and demand. We can see more downside in the old crop as Brazilian crops come to market and their supply becomes more reliable. We should have more news on the trucker problems in Brazil and a CONAB crop report on Tuesday. The current thinking is the news is more likely to be bearish than bullish. China has been absent from the market for the last three weeks and this has some worried that the large pig cull in China could reduce soybean demand.
Canola – Canola is in theory well priced in export against soybeans but we doubt any new business will be done while railcars to the coast remain in short supply. The availability of railcars continues to control the Canadian grain and oilseed markets. We expect canola futures to remain firm with the large open interest now switched to the May.
Wheat – Markets were generally weaker. Chicago wheat futures were poisoned as the trade delivered high vomitoxin wheat against futures. Minneapolis wheat was a bit better following reports that the Chinese had bought US spring wheat in the absence of any Canadian offers. The Chinese prefer Canadian wheat, but with no offers, they are now also exploring Australian wheat.
Barley – Old crop was weaker slipping below $200 for small size cargoes. New crop was stronger with interest from the Chinese who were bidding at $205 usfmt for French barley in Panamax (50,000 tonnes) size cargoes.
Oats – Oat price downside perhaps looks fairly limited, but the upside is just as questionable basis the charts. A decent cost of production means that we’ll probably see good area in Canada this season, but forward profit may need to come via yield versus price.
Peas – For next crop year, we expect acreage increases for peas in most producing countries. In addition, the extremely weak foreign exchange rates in Black Sea countries (Russia and Ukraine) may allow those exporters to become very aggressive on the export market once production is more assured.
The Russian and Ukrainian currencies have weakened by about 41 and 44 percent, respectively, over the past 180 days, while the Canadian dollar has decreased by a relatively small 14 percent over the same time period.
Lentils – Old crop prices are very good due to tightening stocks and continued demand. This means that current crop prices are very attractive and growers should be aware that red lentil prices might well weaken once Turkish new crop product starts coming onto the market in June. New crop prices are at an inverse because of expected higher seeded acres and production in North America and in Australia.
Transportation – The railways’ performance continues to be distressing. Canadian producers are losing business, and ‘basis’ is widening consequently. If they make more Canadian cars available beyond week 35 when the US river system opens, there will be no more business to do.