MERCANTILE Blog: MarketInsight Oct. 17, 2016

Marlene BoerschMarket Insight

Major grains & oilseeds markets

There was little of any real substance in the WASDE report; the corn yield was reduced slightly and soybean yields saw a small increase.

The USDA increased Indian wheat imports to 3myn tonnes; many in the trade consider this to have already been done and that it is more likely that India needs to buy 5 myn tonnes. Weather conditions continued to drag out harvest in both Canada and the US. Export loadings and sales from the US for the week were considered to be quite good.

Funds were good buyers of corn, wheat and soybeans during the week.

Chinese soy imports for September were a record. Spec. EU veg-oil markets were very strong last week. We have had to be patient, but futures and cash markets have seen a decent rally since the lows in September.

Soybeans

  • We would expect to see soybeans return to trade at above $10.00. It does not matter how big the Brazilian new crop gets while the Brazilian Real continues to depreciate (it has lost 31 percent year-to- date); Brazil producers will prefer to hold beans – which is akin to staying long US dollars rather vs. being long their domestic currency.
  • The Chinese continue to be good buyers and the palm oil situation is going to take at least a year or more to get back to normal. Oils in the EU started to get very strong last week, reflecting the shortage of palm oil offers.

Canola

  • You will recall we said canola was cheap to the EU; this continues to remain the case.
  • Oil started to take off this week in the EU as it appears the biodiesel industry is short veg-oil against committed deliveries.
  • Canola continues to be well-priced for the crushers compared to soybeans.

Wheat

  • Wheat trade saw good volume during the past week.
  • HRW exports are 97% ahead of their normal pace (USDA 70%), HRS is up 20% (USDA 15%) with SRW down 40% (USDA 20%). The USDA will need to increase their export estimate for 2016/17 as we had suggested.

Durum

  • Global production will fall 700k mt on the season per AAFC to 38.4 myn mt; they forecast global 16/17 carryout will increase by just 500k mt to 8.8 myn mt – larger, but not burdensome. Quality will be in demand this season.

Feed Grains

  • The WASDE report reduced corn production slightly, but not sufficiently to make corn overly bullish. For the time being corn will follow wheat and soybean futures.

Peas

  • Yellow pea prices were a bit firmer this week in spite of the stronger Canadian dollar.
  • There have been renewed enquiries in the commercial market by India for Canadian peas for deferred positions (delivery January through March ’17).
  • There is nothing to be done right now. We would wait to see how the market in India and China develops from here. We think the downward price risk is low at the moment.

Lentils

  • The lentil harvest is still at 95% done in Saskatchewan, and we wonder if the lentils remaining in the fields will still be picked up and what they will look like? Adding what we estimate to be sample grade lentil to lost acres, should amount to about 500k mt of lentils not likely suitable for export. This combined number is significant.
  • This still is not a small supply of lentils, and we still need good support on the demand side from India for reds.

Chickpeas

  • 75% of Saskatchewan chickpeas are still in the fields, which given current conditions, is a disaster for the crop. Much of the crop may end up as livestock feed, which will be another problem for the popularity of the crop, just when we are getting improved varieties. On the commercial side, there is some anxiety about being able to cover previous sales.
  • The Canadian crop is not large enough to influence the kabuli market, but prices will be very firm until the next Mexican and Indian crops come off.
  • Because of the recent weather problems with Australian desi chickpeas, prices for desis are also firm in international markets.

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