Major grains & oilseeds markets

There were no major surprises in the WASDE report. We lost a small amount in the wheat and corn carryover, soybeans were unchanged to the surprise of most.

Wheat was the most interesting and whilst they did reduce the carryover slightly, they did not address the shortage of quality wheat versus ordinary/feed wheat.

Cash Markets were very quiet in oilseeds and wheat. The major trade was the expected barley trade to Saudi Arabia, which most expect to be Aussie origin.

Weather was benign although we are still hearing reports that the cold spell with little snow cover caused winterkill in the FSU.

Funds were very active last week, buying soybeans in advance of the WASDE report, and corn subsequently.

We don’t see anything really bullish in these reports; however, the size of the Funds position demands both caution and respect.

Soybeans

• The WASDE report was neutral for soybeans
• Funds now own 55.1 myn tonnes of the soy complex, which is four times larger than the projected USA carryover and more than half of the total world’s carryover.
• The market is now saying that there is unlimited demand in China and that’s why the market is so firm. We don’t believe this.

Canola

• In week 27 growers delivered 370,000 tonnes, exports were reported as 292,000 tonnes for the week, and domestic usage was said to be 178,000 tonnes. The visible was reported as being 1.46 myn tonnes.
• Matif rapeseed made contract highs on concern over end season tightness, with EU meal imports down 12% or 1.8 myn tonnes on top of a 2 myn tonnes drop in the EU rapeseed crop. This left the May-Aug inverse ending the week at €30/mt over September. Canadian canola rose to 2-month highs following the CBOT rally.
• Canola continues to be well priced to Chinese crushers and also to the EU for shipments April forward.

Wheat

• Last week’s USDA report was perceived as bullish, but probably did not significantly change the big picture: That there is plenty of wheat against tepid demand, except for high quality product.
• Nearby cash markets will be driven by Russian farmers while they contemplate their developing new crop wheat against and their potentially big current crop wheat stocks.
• The strength in wheat is in the nearby positions, which Canada appears unable to participate in.
• A lot of market focus will start to shift towards dryness in the US Plains and Western Europe as the Northern Hemisphere wheat crop starts to exit dormancy.

 Durum

• Tunisia bought 100,000 tonnes of Mar-May durum at $267-271 (calculates to about C$6.50 per bushel Elevator Saskatchewan basis #3 quality).
• Durum exports as of week 27 lag last year’s by 321k mt or 13%.

Barley

• The Saudi’s bought 1.2 myn tonnes optional origin to the Red Sea for Mar-May at $186-194 (this will be Australian barley), plus 300,000 tonnes to the Gulf at $189-196.
• French non-EU barley exports in December were just 264,000 tonnes, leaving the season total at 920,000 tonnes against 2.66 myn tonnes a year ago.
• Jordan returns to the market on Feb 22 for 50,000 tonnes.

Peas

• Bulk exporters seem to have found a potential solution to the conundrum by having bulk vessels stop off in other Asian ports first to conduct the fumigation there before carrying on to India. However, this process increases overall costs, which eventually will be reflected in lower grower bids. This also is not an option for container exports!
• We should hear on today how the Indian Plant Quarantine Department (PQ Dpmt.) replied to Canada’s proposal re. ‘Alternative Fumigants’.
• The Indian fumigation dispute still poses a risk to pulse market values in general, and country bids have mostly weakened by 25c/bu already

Lentils

• There is no solution to the fumigation problem in India for container shipments with an arrival date beyond March 31/’17. We think lentil prices are more vulnerable to this dispute than pea values because lentil shipments have not been as front-end loaded as pea shipments. I
• Country bids for current crop lentils started to drop last week, with $1-$2/cwt reductions in prices for red and green lentils. New crop bids also dropped, reflecting lower demand expectations from the Indian market.

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