Major grains & oilseeds markets
Last week was a quiet week with harvest pressure limiting upside in markets.
The stock numbers of the USDA were considered slightly bullish on corn, neutral to supportive on soybeans, and negative on wheat.
Quality of wheat continues to be an issue as poor quality of Russian/FSU Australia is now hitting the rounds.
Funds sold some of their soybean long.
Fossil oil was very strong reflecting gains as the Saudis and others agreed to cut some production. In our view this is short term but it has weakened the dollar. We do not expect markets to do much this week.
- Funds sold some soybeans last week but they still own close to 30 myn tonnes, so we cannot be short.
- China registered more purchases with the USDA and we expect more next week. Export registrations were very good for the week and the market was only down a tad on some fund selling.
- The visible supply grew to 1.2 myn tonnes.
- Most producers claim record canola yields so this could be a really big crop – as the recent weekly deliveries are indicating.
- Canola continues to be well-priced to overseas crushers and domestic crushers are making outstanding margins, so even this large crop should be able to find record consumption levels this year.
- Our world wheat numbers presently indicate a demand of 40 percent higher for US wheat in 16/17 above 15/16.
- We think the USDA underestimates demand for US hard wheat, which could prove bullish to cash prices over time. The stock numbers do show a tight balance sheet for spring wheat.
- Where prices go depends upon quality. Overall the world has lots of wheat but quality wheat could well be in short supply.
- EU (satellite-based) crop monitor MARS cut its 2016 EU-28 durum yield estimate by 3.8% vs. last month to 3.33 mt/ha; this is right on the long-term 5-year average.
- Tunisia’s state grains agency tendered for 42.0k mt of durum and reportedly bought it at $287.25 per mt C&F, for Jan/Mch shipping
- The market will continue to be under pressure until the US harvest is complete. Prices should rise when crops go under cover.
- Friday’s rally suggested the trade believes that all the negative news is now in the market, with a lower US yield expected the Oct report, ongoing big demand and funds still short around 32 myn tonnes of corn and wheat futures.
- Exports continue at a good pace with another 130k mt loaded during week 8, for a YTD total of 1 million mt shipped in bulk YTD. That’s 18% ahead of last year’s pace.
- Given the excellent forward sales volume, there is little to no new buying interest for peas for either spot or deferred shipments. Exporters will be busy with sales execution into late October/ early November, and buyers remain absent from markets while large volume earlier purchases start to arrive overseas.
- Things to watch are the yellow pea-chickpea price spread in India, harvest weather in India, and the Aussie chickpea production.
- Bulk shipping of lentils is progressing with 76.4k mt loaded during week 8. There are another 230k mt in the bulk handling system, plus 125k mt on rail going west and 31k mt going to Thunder Bay. That represents a total of 462k mt of bulk lentils on the move during week 8.
- We think current bids for decent product are profitable prices and should be sold. Also, there is little hope for low quality process to gain going forward.
- We fear that new overseas sales will be done at a lower level than over the summer; there no longer is a general shortage of pulses.
- Canaryseed production and supply will fell to ~135k and 125k mt, respectively. Exports will have to shrink to ~125k mt due to limited supply, and carry-out will again be small. The balance sheet is pretty tight for this year. We would not be in a rush to sell now at $22/cwt.
[If you are interested in more detailed intelligence and in our supply & demand balance sheets, pls contact Mercantile]