Major grains & oilseeds markets
The futures markets declined on the week as more reports of a potentially huge US crop circulated, suggesting the WASDE corn and soybean yield estimates would be surpassed in the USDA’s August report. The International Grains Council also increased their grain production estimates.
Cash trading was sparse on the week. It is possible the trade to Egypt of 180,000 tonnes of Russian wheat could be canceled, as the Egyptians changed their ergot specifications after the deal was confirmed. The big Syrian tender for 1 myn tonnes was deferred.
End users are reluctant to cover deferred requirements; however, we did see some fund short-covering during the week.
- The market took a beating this week as various crop tours reported high yields for new crop soybeans.
- The Chinese were only small buyers in a market which found more sellers, in particular from under- hedged producers.
- Funds were only modest buyers (3.2 myn tonnes) but both funds did hold on to their overall long of 30 myn tonnes of soybeans.
- The visible supply has shrunk to 663,000 tonnes, so if harvest is at all delayed then exporters and processors will be in trouble.
- Canadian canola continues to be well priced for the Chinese buyers and they are further buyers of both oil and seed.
- Both US and EU futures have come under significant selling pressure and there is more interest to sell the deferred carries in the Black Sea cash market, as the size of the Russian and world crops seems to outweigh the fact that Russian remains the world’s cheapest wheat.
- Egypt’s decision on ergot could have significant consequences.
- StatsCan put 2016 durum output 26.3% above last year at 6.807 myn mt
- IGC last forecast global 2016 durum production would come in 2% below the previous year due reduced prospects in Morocco, Algeria, Turkey, and Syria. Global carry is currently expected by AAFC at 200k mt above last season at 8.0 myn mt (manageable).
- If the USDA increases corn yield in the September WASDE report, the markets will trade lower.
- StatsCan expects a significant 44% increase in pea production from 3.2 million mt in 2015 to 4.6 million mt this year.
- Overseas buyers (India, China, Bangladesh) are already well covered for their fall needs and can thus not be expected to significantly add to their purchases. The market simply will need some time into late fall to clear the existing forward sales.
- We expect pea ending stocks for the 2016/17 crop year to settle at around 675,000 mt, up from roughly 350,000 mt last crop year. This means the stock-use ratio looks to increase from ~10% to ~15%.
- The production outlook still remains pretty good: lentil supply should still reach 3.3 to 3.4 million mt, up from 2.4 million mt last crop year.
- Quality remains a much larger issue for lentils than for peas, although the samples received so far look somewhat better than initially feared.
- Prices for ‘decent’ lentils are still at very profitable levels that generate excellent returns per acre; farmers with few sales to date should be interested in.
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