Major grains & oilseeds markets
Prices collapsed this past week following reports of very good weather conditions and forecasts of improvements in the outlook.
Funds: Index Funds bought 2 mln mt over the past week, but Specs did not do anything.
Weather: The US was mostly dry and warmer. Canada was warm and dry, particularly so in Alberta and western Saskatchewan while Europe became overall dry except for the Black Sea regions with warming temperatures. North Africa, and in particular Morocco, got significant rain and the Middle East saw widespread showers. Argentina and Central Brazil were almost completely dry while Australia got rain in the south and east but stayed dry in the west.
Outside Markets: The dollar was stronger (and this impacted some commodity prices), crude oil was higher, while copper was weak. Outside markets in general were weaker which had some negative impacts upon our markets.
- US soybean plantings were 8% complete (10% last year, 6% average).
- Funds still hold a much-greater sized position relative to the carryover in soybeans, so we did not see them break much at all. While this continues we think it is very dangerous to be short soybeans.
- Producers delivered 375,000 tonnes in week 39, domestic use was 155,000 tonnes, and exports were 203,000 tonnes. The visible supply was put at 1.44 myn tonnes.
- Canola deliveries and usage continue at record levels; we have increased our production estimate. Carryout remains very tight and justifies a premium for canola over soybeans.
- Today’s StatsCan report confirmed what we have long been talking about: Canadian flaxseed stocks are up by 49.5% this year over last year to 571k mt (382k mt last year).
- Farm stocks were reported at 491k mt, while commercial stocks are at only 80k mt.
- Lackluster exports will keep ending stocks higher than last year’s at years’ end as well.
- This week there is a USDA WASDE report due for release; with higher US and world stocks expected by the trade, there is little chance of any bullish surprises.
- Winter crop prospects remained good-to-excellent in central and eastern portions of northern Africa’s wheat belt, with timely rain during early April likely enhancing crop yield potential.
- Argentine corn crop is o.k.; it’s just sitting in the fields. Brazil may still produce an 80 mln mt crop. The U.S. corn crop outlook is good. It is unlikely USDA will issue a bullish report this week.
- The StatsCan report stated that compared to March 31/ ’15, today’s pea stocks at 1.243 million mt are 28.1% (or 485k mt) lower than last year.
- Seeding is progressing well, but we are getting concerned about moisture in some areas of Saskatchewan and in Alberta.
- Overseas, Indian markets continue to be fuelled by volume and quality shortfalls of the rabi crop. With most old crop pulses already spoken for, the extra demand has transformed itself into stronger new crop prices.
- Because weather will play a key role in pulse market sentiments over the summer and fall, we expect volatile prices for pulses. Given the high level of forward sales, the risk of defaults also looms large and could increase price volatility further.
- Lentil prices also remained form due to supportive foreign exchange developments, diminishing stocks, and continued demand from India and elsewhere.
- The StatsCan ‘stocks as of March 31/’16 report’ supported the sentiment that lentil stocks are literally running out. If correct, today’s current lentil stocks of only 416,000 mt are 64.1% (or 743k mt) lower than last year’s lentil stocks. Specifically, on-farm stocks in Saskatchewan fell by 720k mt to 275k mt.
- new crop lentils, 35% of SK lentils were in the ground as of May 2nd. In Alberta, 35.6% of lentils were seeded as of May 3rd. Again, soil moisture remains a huge concern in all Alberta regions.
- With weather in North America and in Asia playing a key role in pulse market sentiments over the summer and fall, we expect forward prices to be volatile.
- We expect to see very good upside to kabuli chickpea markets/ prices this fall.
- We expect prices to stay flat for now unless there are production problems in Canada.
[If you are interested in more detailed intelligence and in our supply & demand balance sheets, pls contact Mercantile]