Major grains & oilseeds markets
The markets continued their firmer trend following the WASDE report, particularly corn, which is pushing its resistance levels. In our view, it is the front-end demand-pull, which is the supportive item to the corn/soybean market: To satisfy cash demand and as well the large index and speculative fund long futures position will require that producers sell approximately 60 percent of production by December 31.
Soybeans – There was nothing in the WASDE report that was of much surprise to the market, as the numbers came in close to expectations. Basis the numbers we would expect the average ratio to corn to be about 2.50. It is likely to be higher for the next few weeks because we have very good demand for US soybeans through to December. Crush margins in China and the demand for soymeal both remain good and we suspect China has been a good buyer of US soybeans. The markets were setback slightly by news that Argentine soymeal has been sold to the US. However, we don’t think this is a big deal as it only works into the south of the US because of cheap freight.
Canola – Producers delivered close to 300,000 tonnes in week 14 bringing the year to date to 4.7 myn tonnes compared to 3.3 myn in 2013/14. Visible stocks are a comfortable 1.2 myn tonnes with primary stocks at 724,000 tonnes. Canola futures weakened a little while elevator “basis’ levels narrowed. We have heard $10.00 paid at the elevator.
Wheat – The USDA numbers for wheat were fairly pedestrian as is usually the case at this time and forward demand for US wheat remains in question for now. Canadian price remains poor relative to those across the international border. In our view global cash wheat prices have bottomed out. We expect to see further Canadian basis gains. Our weak domestic currency is a supportive input. Canadian premiums for quality grain can be expected to improve during the intermediate period relative to the overall flat price. Overhead resistance is provided by the wealth of global feed grain supply.
Durum – Given the dearth of top quality durum, overseas buyers have begun to accept offers of lower quality durum, and this is evidenced by the purchase by Algeria in the past month of at least 2 cargoes of #3 CWAD. The cash market remains on fire, as evidenced by the US Gulf FOB chart. That sort of price action appears to be overdone, as the market has rallied irrationally now in an effort to draw in supply at near any cost; it is probably unsustainable.
Barley – Global barley trade was dead quiet with much of the EU trade at a conference this past week. Basis EU sales numbers, their exports are presently running 25% below the previous season. EU price has been supported of late by the wheat rally and slow sales by Russian producers, but much of this has been offset by that EU consumers appear already well-covered. At home, the Lethbridge barley quote increased $4.00 per mt on the week.
Oats – The wheat rally can be considered at least a psychological support to oat price, though the cash and nearby charts continue to look rather mixed, as price continues its general sideways move of the past year.
Flaxseed – Flaxseed is finally starting to move through the system. Another 25,400 mt of flax were delivered by producers during week 14, while 15,500 mt were exported. This puts YTD exports at 49,200 mt versus 43,900 mt last year. There are still 65,100 mt of flax in primary elevators, 10,300 mt in Vancouver and 8,300 mt in Thunder Bay. The Thunder Bay stocks are the start of the fall export program to Europe.
Peas – As it stands, YTD farmer deliveries of peas are already at 135% of last years’ pace and exports at 151% of last YTD. Specifically, bulk exports last week amounted to 30,400 mt before container loadings. – Mercantile remains of the opinion that peas will become tight in the New Year and prices will firm accordingly forward.
Lentils – Using the latest StatsCan export data that includes container shipments, lentil exports to the end of September are 14% ahead of last years’ record pace. We note that India has been the most important destination to date, taking 84k mt in the first 2 months of the crop year. Turkey imported 45k mt during that time frame, and the UAE 27k mt.
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