Major grains & oilseeds markets

Markets were slow last week as traders await next week’s release of the USDA’s WASDE report. Traders are concerned that the USDA would change their yield estimates from the August report. We expect that they may reduce their yield on corn, leave their soybean numbers unchanged, and increase their yields on spring wheat. Any reduction in the USA yield will likely be offset by an increase in foreign production. Overall, our bias is that the report has the potential to be more bearish than bullish.

Cash trade was also very thin on the week, and the only report we saw of business was some durum wheat traded to Algeria.

Funds were also very quiet, preferring to see the WASDE numbers before making additional commitments.

Soybeans

• We don’t expect the USDA to change their US production numbers, but could see them increase foreign production and decrease Chinese demand.
• We don’t see anything bullish in soybeans at present and see the market trading within a 25 cent range – going below $9.50 in the near term.

Canola

• In week 5, growers delivered 550,000 tonnes of canola, exports were 58,000 tonnes, and the domestic usage was 126,000 tonnes. The visible grew to 805,000 tonnes. Stocks are still tight in Vancouver, but primarily now due to lack of railcars in transit rather than shortage of total stocks.
• StatsCan released their estimate of canola stocks and we can see that farm stocks appear to be the lowest since the crop year of 2012/13.
• Updated balance sheet available in the full wkly. report.
• Canola futures need to be about $450 compared to current soybean prices to get the Chinese fired up to buy

Wheat

• Current conditions are too dry in Ukraine and Australia and wet in Argentina. In some areas new crop prices are below production cost in local currencies.
• The USA dollar continues to be pressured by Trump actions.
• The USDA needs to make significant adjustments to its production estimates – there are some potentially bullish elements out there and we are close to five year lows, so let’s see what next week’s WASDE shows.
• Feed Wheat is taking feed demand away from corn.

Barley/ Feed grains

• Wheat is cheap for chicken consumption in the Eastern US and buying demand away from corn. We can see at $21.00 premium to corn, wheat is good value, particularly in poultry rations.
• See full calculation in our report.

Peas

• According to StatsCan last week, we produced a total 3.8 million mt of peas this year in Western Canada, compared to a 26% bigger crop last year of 4.8 million mt. However, we suspect that the average yield used at 34.4 bu/acre may be a touch low.
• But, while pea supply in Canada looks to be almost 1 million mt smaller than last year, the numbers have evoked no urgency on the part of buyers because this year importers still have supplies domestically and are being pestered with alternative offers from the Black Sea countries.
• This means that for now, there is little new demand (over and above of forward sales) expected from the big buyers in India and China for the next 2-3 months.

Lentils

• The Canadian lentil crop is about 800k mt smaller than last year, but buyers are not taking much notice of this because red lentil buyers in India still have some stocks domestically to rely on, and in the green lentil market, Algerian buyers are seeing some alternative offers of large greens from Russia.
• For, now, green lentil prices are still quite good and warrant selling, while red lentil prices will take a lot of patience. Hopefully you sold production contracts/ DD’s when recommended.

Canaryseed

• StatsCan is using a relatively healthy 1,146 lbs/ acre to generate 117k mt of production. However, SAF is showing an average yield of only 959 lbs/acre, which is the yield we are using plus a slightly higher acreage than StatsCan.
• The end result of both scenarios is a tight balance sheet that will require export rationing by 10-12k mt to make ends meet. If these numbers are correct, then we should see prices appreciate in the latter half of the crop year.