MERCANTILE Blog Sept. 25, 2017

Marlene BoerschMarket Insight

Major grains & oilseeds markets

Futures trade up, but in a narrow range with Funds virtually absent from the market.

Another quiet week in cash trading; only Egypt reported buying some Russian wheat.

In general, weather was a non-factor, except that rains in the USA delayed harvest a little. We are about 7 days away before we see maximum harvest pressure from corn and soybeans.  Soybeans have been leading the market with some buying from China and short covering, whilst farmers are non-sellers. Harvesting the crop is of greater importance to them than making additional sales.

In Canada, country elevator and overall stocks continue to climb. Reports we get from the country suggest the quality and quantity of the harvest, whilst not great, is better than forecast.

Next week we get the USDA’s estimate of Sept 1 grain stocks – this report should give us a better idea how much wheat has been collected in the US.


  • Whilst we are still a little bearish on soybeans, in the short term, we could see a rally to $10.00 basis November.
  • Margins in China have improved a little so we expect more buying next week. The chart says we are trading around first resistance; second resistance is around $10.00.


  • Growers delivered close to 600,000 tonnes canola in week 7, the domestic usage was 149,000 tonnes, and exports were 115,000 tonnes. The visible grew to 1.3 myn tonnes, which is a comfortable number.
  • Canola is now 3 percent more competitive against soybeans and with stronger fuel prices this has encouraged some buying of Canadian Canola for bio-diesel from the EU and the US. We don’t see this as a long-term event, but short term. It has helped canola futures. However, heavy farmer deliveries have widened the “basis’ in many areas.
  • If you have sold 50 percent of your crop, we suggest patience is your best partner. – No sales. We recommend selling at $10.50 or better at the elevator.


  • A major re-allocation of the world export mix is still needed. It is now underway, with French wheat pricing, Southern Hemisphere crops, and Russia’s real export capacity being the keys. At the present time, Russian and FSU crops are leading exports whilst North American and EU exports are lower.
  • While US spring wheat production will be significantly lower (down by 3.51 million mt), Canadian spring wheat production for 2017/2018 is virtually unchanged and Russian spring wheat production is projected to be up by 2.12 million mt.


  • Given the average or slighlty above average production in Europe, $8.00 is probably a good selling opportunity for durum wheat.

Barley/ Feed grains

  • Wheat continues to be competitive with corn in the Eastern regions and in the poultry Industry in the USA. The new crop premium of soybeans over corn would suggest planting of soybeans preferable to planting corn.


  • Bids in the country for peas have weakened during September, as exporters are not booking a lot of tonnage over and beyond production contracts/ overages. Prices will likely trade sideways for a while. Demand and shipments should pick up in the New Year, so the market will take a bit of patience.


  • We expect the next tranche of volume demand from India to occur early in the New Year.
  • But because of the slower shipments this fall, the big difference in the Canadian pulse markets come Jan/ Feb’18 will be that there will be a lot more unsold farm product looking for markets early in the New Year than over the past two years, when already 60% of all product was sold. This year, lentils may only be 30-35% sold by January ‘18.
  • However, given Canada can reach a 2.1 million mt export target, ending stocks at crop year end should be back to a small ~180k mt level, roughly a small 7% stock-use ratio. We wonder if all buyers are aware that ending stocks could become this small this crop year.