Major grains & oilseeds markets
The WASDE report last week was not exciting. The corn and wheat estimates were in line with expectations and neutral. Soybeans were a little bullish on the 16/17 crop, especially considering the US crop is not in the bin and the South American crops are not even planted.
US Weather during the coming three weeks will be watched very closely.
Spec funds were big sellers of corn and have now sold 34 myn tonne of corn futures since June 14th. In our view the next speculative fund move will be either to sell some soybeans or to take in some of their wheat short while staying with soybean long.
Rain in Canada is starting to be a problem in some areas and we are hearing more reports of damage to special crops.
Weather: Next week some US forecasts are calling for some extreme heat in the growing areas. It could be a volatile week.
The US Dollar Index remains firm as traders still have not figured out what the UK BREXIT vote really means for the Euro or the Pound. Oil is going nowhere. In the short term, we do not expect outside markets to have much influence on commodities.
- The WASDE report was potentially bullish on soybeans.
- However, the market is already very long; for it to go higher we may need a weather event.
- Producers continue to deliver large quantities of canola. In week 49 the deliveries were 343,000 tonnes, while exports were 216,000 tonnes, and domestic usage was 189,000 tonnes.
- The large amount of deliveries has us revising the balance sheet again; in our view the error has been in the acres planted (most of us underestimated them).
- We did have confirmation of one Canadian canola cargo sold to China for August shipment, and two cargoes of Australian-origin were sold for Nov/Dec shipment basis max 1% dockage.
- Given their discounts, Russian milling wheat is attracting more interest, if only as a spread against increasing feed wheat supplies.
- The quality issue in France (and also in Germany and in Poland) has to be resolved, but North American crops just keep getting bigger.
- In the USDA report, US durum production was pegged at less-than 1% above 2015 at 82.8 myn bu. US yield was forecast 3.7 bu/ac below last year at 39.8 bu/ac.
- Algerian Jan-May imports increased 9% vs. the same year-ago period due increased barley and soft wheat purchases. Durum imports increased 5.7% during the period to 937.5k mt.
- This week the market will be about weather. Next week’s hot dry outlook looks pretty certain, but there is much less clarity beyond that.
- Pea crops look very good and supply this year could be up by 18% (+).
- Post-harvest movement will be very brisk, though most of the early movement has already been bought and sold. Market developments thereafter will depend on the quality of the monsoon on the Indian Subcontinent.
- Monsoon precipitation in India is now 4% ahead of normal for the country as a whole, and 25% ahead fore central India.
- We are worried about some of the lentils crop due potential disease and weed pressure, though most crops seem to be coping so far. So far, we are still looking at a big Canadian and US crop.
- Old crop is virtually dead now, and new crop prices have stalled to see how the crop develops.
- We expect a Canadian production of about 130k mt, up from 90k mt last crop year. There will be no problem to export our entire production this year.
[If you are interested in more detailed intelligence and in our supply & demand balance sheets, pls contact Mercantile]