MERCANTILE Blog: MarketInsight, Sept. 12, 2016

Marlene BoerschMarket Insight

Major grains & oilseeds markets

The futures markets were a little stronger during the week, despite good volume sales by specs and funds. Cash trade in wheat was active basis optional-origin trades. US wheat is now competitive to all Pacific destinations and Eastern destinations, which can handle Panamax size vessels.

WASDE today: The September report showed US corn production at 15.093 billion bushels on a 174.4 bu/ac national average yield. The trade was on average anticipating a slightly smaller corn crop in this report. The market reaction has been muted.  Expected world corn ending stocks tightened for both old and new crop, with new crop now seen at 219.46 mln mt vs. 220.81 last month.

USDA projected an all time high record yield of 50.6 bu/ac for the US in its monthly crop reports. The crop is expected to top 4.2 billion bushels (4.201 billion). The yield number was higher than all of the figures in the wire surveys. World figures were slightly tighter for old crop at 72.9 mln mt, and up roughly 1 mln mt for new crop at 72.2 mln mt. Consumption estimates continue to be robust, with USDA cutting old crop stocks to 195 million bushels because of another 60 mbu hike in exports.

Funds: Index funds reportedly did very little during the week while speculative elements were big sellers of corn, wheat, and some soybeans.

Soybeans

  • Today soybean futures are mostly between 15 and 17 cents lower on the day after USDA projected an all time high record yield of 50.6 bu/ac for the US in its monthly crop reports.

Canola

  • Canola continues to be well-priced compared to other oilseeds and demand is good.
  • Domestic crushers have excellent margins.
  • StatsCan again increased their estimates of the 15/16 crop – which we think should be ignored, and their 16/17 estimate should also be ignored.

Wheat

  • Syria again pushed back its 1 myn tonne Russian tender, this time to Sep 19th.
  • Egypt rejected a Romanian wheat vessel at load due to ergot.
  • Korea bought 60,000 tonnes of feed wheat at $180 for Jan arrival, some $8-10 below corn. Very cheap considering Korea generally pays up to $9.00 premium for wheat over corn. Wheat generally used for poultry feeding.
  • Funds increased their already significant shorts in futures and HRW is buying export demand.

Durum

  • Higher current durum stocks are of little surprise given the slow exports of the past season.
  • Morocco is tendering September 21 for 45k mt optional-origin, for Dec shipment.
  • Quality remains a concern in Canada with fusarium rearing its head; good quality durum will be in demand.

Feed Grains

  • The corn yield close to 175 is somewhat bearish and any increase in feed wheat supplies will affect feed grain values.

Peas

  • International pea fundamentals have changed towards higher expected supplies against a potentially delayed/ smaller import demand.
  • Given the good forward sales volume, there is little to no new buying interest for peas for either spot of deferred shipments.
  • It will likely not be until January/ February 2017 until we see new volume buying coming back to the market. This is not a surprise development!

Lentils

  • We suspect that both yield and quality have deteriorated somewhat from the early product that came into the cleaning plants. Yields could well be down 100 to 150 lbs/ acre from our earlier estimates.
  • But buyers see that Canada will still have a bigger lentil crop than last year (due high acres, even given the weather problems), and at the same time domestic crops in India look promising, Australia’s lentil crop is bigger than last year, and U.S. crop is larger as well. This is why lentil production problems in Canada do not automatically translate in higher prices as they did in recent years.

Canaryseed

  • Supply and usage remain fairly closely matched.
  • We can not see prices falling from current levels as there is no visible surplus this year, and should harvest problems develop, there clearly is room for price increases.

[If you are interested in more detailed intelligence and in our supply & demand balance sheets, pls contact Mercantile]