Major grains & oilseeds markets
Funds and speculators reportedly sold about 8 myn tonnes of beans between the December 6th’ and January 3rd’, mostly in the latter part of December. This together with a cancelation of 900,000 tonnes by China (supposedly) set a bearish tone to soybeans – which closed under $10.00 (which had been the support level for the market). Funds bought some of their wheat short in and corn followed wheat to be higher over the Holidays.
Cash trade this past week was very light, and only Algeria’s buying of wheat was of significance.
China did little buying and they will continue to be out of the market as the Chinese New year celebrations start. This will leave oilseed markets on the defensive until the end of January.
A fresh WASDE report is due for release on January 12, which the trade assumes will prove supportive.
- The markets reportedly broke on fund selling; however, it should be noted that funds still have a large long position, and that some of the bean selling was related to wheat buying – as funds were long soybeans/ short wheat as a straddle position. Note the funds bought in 4.3 myn tonnes of wheat futures.
- The canola market followed soybeans lower, and without fund action, the Winnipeg market was in the hands of the companies whose interests were for lower futures. Volume in Winnipeg was quite low, but the lower prices helped crushers and exporters to price “basis” contracts at lower levels.
- Good movement to Thunder Bay continues; canola remains competitively priced for EU usage. In the EU canola oil continues to be priced at $915.00USF/MT.
- Canola is also still well-priced for China, and sales will take place as soon as their New Year festivities end.
- Year-to-date exports now exceed exports for the previous year, and we expect to see them continue to increase if canola remains at such a good discount to soybeans. YTD crush is 14% ot 500k mt ahead of last year’s.
- The week 20 & 21 CGC Canadian Grain Handling report shows that at 5.8 million mt, this crop year’s Canadian wheat exports lag last year’s wheat exports to date by a significant 1.54 million mt or 21%.
- Using the same report, we note that durum exports lag last years by 221k mt or 12%.
- At the same time, US wheat exports are ~33% ahead of last year’s pace.
- We have a fairly neutral attitude towards the wheat market right now. On the one hand, big wheat stocks and expanding acres are keeping a ceiling on the market, while weather, changes in Fund positions and shorts create a floor to the market.
- Crops in Morocco and western Algeria reportedly were “vastly improved over last year”, and current winter grain yield prospects are expected to show y/y gains as well. Winter wheat prospects In Tunisia were termed as gd/ex – despite dryness there.
- Grains will follow wheat for the time being – unless we see more concerns regarding South American weather conditions. The December stocks will be released this week; they will be looked at carefully for confirmation of crop size and usage.
- Pea markets are relatively quiet, which is what we expect for early January. Having said that, we are impressed that yellow pea values have held steady, while at the same time the values of major grains have been under pressure. We think the biggest reason is that YTD exports of peas have been very solid and are almost 40% ahead of last year’s pace. This is because India has been an exceptionally good buyer of peas YTD (+21% over last year), as has China (+59% over last year), and we have also seen some additional demand from the burgeoning pea fraction business and from the pet food business.
- The sentiment of the lentil market is different from the sentiment in the pea market. For one, export performance has not been as good as for peas. We have recently caught up on bulk exports relative to last year, but total exports including container shipments (as of Nov. 30/’16; latest available destination export data) are behind those of last year by 11% or (143k mt) in spite of the bigger 2016 crop.
- Nothing new here.
- Canaryseed exports are 12% behind last year’s exports, though Mexico is right on pace. However, shipments to Belgium (EU) are 36% smaller than last year. Brazil is becoming less and less significant to our market.
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