MERCANTILE Blog: MarketInsight Feb. 6, 2017

Marlene BoerschMarket Insight

Major grains & oilseeds markets

Futures traded within a narrow range last week before easing on Friday following some Fund selling. Weather in South America was reported as good and this put some pressure on the soy complex as some analysts raised their production estimates.

Soybeans and meal were under pressure as private estimates on Brazil soybean production continue to inch higher.  Chinese buyers will return next week following the New Year celebrations and we expect they will buy beans as crush margins still remain good in that country.

The wheat trade was quite good at higher prices for low quality milling wheat and good premiums were paid for quality.


  • Longer term we are bearish on soybeans.
  • In the short term with the Chinese back in the market and expected to buy due to good domestic crush margins, we can see soybeans trading higher.
  • A rally should provide better opportunities to sell November/December cash soybeans.


  • In week 26 growers delivered 460,000 tonnes, the domestic usage was 200,000 tonnes and exports were 275,000 tonnes. Usage again exceeded deliveries.
  • Total usage is now 10 myn tones exceeding the last year to date by 1.1 myn tonnes.
  • But rail movement in week 26 was a very poor at 625,000 tonnes, so we don’t expect elevators to improve their “basis” levels in Saskatchewan in the short term.


  • As per StatsCan, total wheat stocks combined climbed by 17% or 3.6 million mt over the previous year. Wheat stocks excluding durum rose by 5.4% or 930k mt over last year.
  • While Canadian stocks are rising, US wheat exports are up by almost 30% over last year’s. This tells us that the reduction in Canadian wheat exports this crop year is not necessarily a function of lack of markets. The delayed harvest, currency differences and logistics are generally quoted as the reason, but the lack of offers on ongoing tenders is conspicuous as well.
  • There is plenty of wheat against tepid demand, except for high quality product.
  • In the market, wheat buyers are still looking to purchase HRW & HRS wheat, and to a lesser extent for SRW.


  • Per StatsCan, Canadian durum wheat stocks are up by a huge 63.1% or 2.7 million mt.
  • Durum exports during week 26 amounted to 113k mt and 2.0 million mt year-to-date. This is 13% or 312k mt lower than last year-to-date.

Feed Grains

  • Export and sales numbers were good for corn and this led to stronger cash premiums in the nearby positions.
  • Ethanol usage was particularly good and should mean the USDA will increase corn usage in the next WASDE report.


  • Week 26 was a very decent export week for peas: 71,000 mt of peas were loaded at the West Coast and have left for Asia, bringing this year’s bulk total to over 2 million mt, 23% ahead of last year’s loadings.
  • However, there are major storm clouds brewing in the market that may have major negative effects on Canadian pulse prices.
    • The Plant Quarantine Department in India (PQ Department) announced “they will not extent any relaxation to non-compliance of Methyl Bromide fumigation for agri-commodities with effect of April 1, 2017. This means that any consignment/ cargo arriving without fumigation from load port will be rejected by the PQ Department.”
    • Pea stocks at December 31/’16 increased by 13% or 314k mt to 2.7 million mt over the previous year (2.4 million mt in 2015). Given the excellent disappearance YTD, we are not especially worried about the remaining pea stocks per our supply calculation last week.
  • However, the Indian fumigation dispute poses a major risk to pulse market values in general, and country bids have mostly weakened by 25c/bu already.


  • See our comments in the Pea section about the fumigation issue with India. 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. If the fumigation dispute cannot be solved speedily, this leaves the remaining Canadian lentil stocks very exposed.
  • Statistic Canada lentil stock numbers: At 1.8 million mt, lentil stocks at December 31/’16 were 49% or 578k mt larger than the previous year (1.2 million mt in 2015). Given that lentil supplies were up by 415 million mt at the start of this crop year over last, this actually shows that YTD exports have already been relatively slower than last year. This is why shipment disruptions to India will hit lentils more heavily than peas.

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