MERCANTILE Blog: Market Insight June 12, 2017

Marlene BoerschMarket Insight

Major grains & oilseeds markets

There was nothing that we saw in the WASDE reports, which were unexpected or bullish. The markets did respond to the lower stocks number. However, anyone that did not expect this has not been following recent grain markets. The new stocks numbers still show that we have more than sufficient stocks basis current demand forecasts.

What were bullish were the hard wheat numbers and conditions. However, this can be corrected if Australia ships more wheat and Canada starts to ship greater quantities of spring wheat.

Funds bought corn and there was little farmer selling, which gave us some strength in futures. In our view, Kansas wheat futures deserved more bullish attention than corn.

We are now in a weather market, so for the time being markets are likely to be volatile.

Funds Index Funds did a little selling (we have included a chart showing where the Index Funds have been since April 2016). Specs and Spec funds were huge buyers of corn basis the WASDE feed grain numbers.


  • Beans followed corn higher; however, we do not see anything that justifies stronger soybeans at present.


  • In week 44 growers delivered 380,000 tonnes the crush was 130,000 tonnes and the exports were 206,000 tonnes. The visible increased a smidgen.
  • Total canola deliveries to the elevators were a record 17 myn tonnes year to date – the largest single crop.
  • Elevators are paying a dollar a bushel premium for old crop supplies and we expect the crushers will need to pay a larger old crop premium before it is over.
  • Given usage it would appear that the supply/demand tell us we should run out of canola. However, we think this is wrong and the most likely cause was that the carry-in estimates were too low.


  • There was a good trade in cash wheat (Algeria & Egypt; tender Fri. Saudis), but it should be noted that NO North American wheat featured or was competitive.
  • Basis the Wasde report, world stocks will continue to build in 2017/18, and with total Russian supplies now above last year, the world’s cash driver should once again have plenty of wheat to export (and it remains easily the world’s cheapest quality wheat).
  • On the other hand, the USDA’s all-wheat US total of 1,824 Mil requires an HRS yield of around 43 bpa, with many in the trade already using a sub-40 bpa number. Consequently it’s the July report that will address the US S&D’s ‘by-class’, which will be trade’s real focus. However, most of the fund short is in soft red Chicago wheat, which is not so bullish.
  • In our view Kansas undervalued.

Barley/ Feed grains

  • Old crop global corn stocks were raised for a 4th straight month but new crop looks like last month with a projected 30 myn tonnes decline in world stocks in the coming season – albeit with 20 myn of those in China.
  • Weather is now back up front and center, whilst awaiting the all-important June 30th stocks and plantings report, and note last week’s major fund short covering on corn.


  • There is not much to add to last week’s discussion on pea shipments and markets. Markets remain very quiet, meaning that not a lot of new sales are being made these days. Old crop volumes are winding down, and buyers have made their first tranche of new crop purchases and are not likely to re-enter the Canadian market in style for a while.
  • Other origins in Europe/ Eastern Europe have significantly further advanced crops, and are more active in offering new crop product into the Indian Subcontinent. This is why we do not expect new crop price advances over the near term unless the weather stays very dry on the Canadian Prairies and in the Dakotas/ Montana (US peas).


  • Demand is subdued, with the odd sale of green lentils taking place. This is keeping old crop values sustained for the remaining bits decent old crop lentils. Greens are also benefitting from the projections that pigeon pea acreage in India will decline from last year’s levels.
  • Red lentils, on the other hand, are experiencing some down pressure while Ramadan is in progress and because of stocks of arrived product in India. Pending reinstatement of fumigation requirements at the end of June are not constructive either.

 [If you are interested in more background intelligence and our supply & demand balance sheets, pls contact Mercantile]