MERCANTILE MarketInsight Blog, November 6, 2017

Marlene BoerschMarket Insight

Major grains & oilseeds markets

Last week, weather cooperated allowing farmers to complete winter field work in Europe and harvest to near completion in North America.  Futures traded in a narrow range, Spec Funds completed their near-term objective to be short an overall 50 myn tonnes, selling more corn and wheat futures. Cash trade in wheat was active; notable was Iraq buying 450,000 tonnes of US winter wheat. But EU all wheat exports were reported to be 7.2 myn tonnes, 26 percent less than last year’s exports.  Index Funds did nothing, while Speculators reached their short term objectives to be overall short 50 myn tonnes. Note both Index and Spec. are long oilseeds.

For next week, we expect a continuation of the same in the coming week with more pressure on cash wheat and corn, as EU/North American sellers start to consider themselves undersold. Harvest is almost complete, so futures should remain steady, but more pressure on export cash premiums.


  • Beans look to be locked into a trading range of $10.00 – $9.50 and won’t change from that unless we get more Chinese buying, or more farmer selling as the harvest winds down.
  • We don’t see anything particularly bullish in the balance sheet and our bias is that beans will trade closer to the $9.50 level.


  • Growers delivered 378,000 tonnes in week 13, exports were 165,000 tonnes, and domestic usage was 177,000 tonnes. The visible was said to be 1.5 myn tonnes, which is about 1 month’s usage.
  • Exports in October were particularly good, mainly due to the Chinese taking 480,000 tonnes. We expect the exports for Nov/Dec to be slower, as we understand the Chinese bought canola oil as nearby crush margins for canola are not so good and local demand is stronger for soymeal.
  • Canola is better priced for Jan forward, so we expect them back in as aggressive buyers in the New Year. We expect our total supply to restrict our exports to 10 myn mt, even whilst demand is greater. We don’t see any need to change our balance sheet.
  • Our suggestion remains the same: Be patient and don’t make new sales until the New Year. If sales for cash flow are necessary, we would put in pricing orders not below $11.75/bu.


  • The sheer size of the Russian crop appears to be bringing some increased sales ‘urgency’ on the part of the domestic market. The EU appears undersold and needs to be more aggressive to increase export sales in competition with Russia/FSU wheat.
  • There does not seem to be anything bullish on the wheat horizon in the short term. – Don’t be short Mpls. Dec futures.
  • Canadian wheat exports appear to be going nowhere, and in our view, exports will be lower than last year if exporters don’t become more competitive.


  • World durum supplies are adequate, and cash durum wheat is currently bid at $8.00- $8.50 per bushel for 1 CWAD 90 HVK.

Barley/ Feed grains

  • Dec corn and wheat futures traded slightly higher despite fund selling, soybeans were a little lower. Wheat is well priced for the poultry industry, so we see wheat gaining on corn over time. Futures markets remain in a narrow range and limited volume – mainly spreads trading.


  • The pea handling data in Canada continues to lag last year’s pace by about 37% for all of producer deliveries, terminal receipts, and importantly, bulk exports.
  • Peas from Black Sea countries are still available in the market to Indian and Bangladeshi buyers and are offered at cheaper prices than Canadian peas by up to US$30/mt. In fact, India has taken almost 800k mt fewer Canadian peas YTD than last year due to more choices in exporters. We expect that much of this ‘displaced demand’ will not be recovered in Canada this year.
  • The GoI is doing a good job to make everyone nervous about import restrictions/ higher Minimum Support prices (MSP’s)/ the Cdn. fumigation restriction, and they are now openly talking about possible tariff barriers for peas, or even worse potential quotas on pulse imports of various pulses; this is causing A LOT of uncertainty about the world’s single biggest pulse market.
  • So while the Canadian pea supply is smaller this year by roughly 900k mt, it is hard to come up with positives to the market at the moment. We think that peas have limited downside into the New Year, but it is also increasingly hard to find arguments for any substantial upside, especially as farmers are getting more nervous about the markets going into the winter.


  • The bulk handling numbers are dismal and continue to fall behind due to lack of shipping to the Indian Subcontinent. This is affecting espec. red lentils.
  • Even though greens have a relatively much tighter balance sheet than red lentils, there is a risk that they will keep falling for a while, as Cdn. farmers become panic sellers. As we move into the New Year, acreage forecasts for green lentils in Canada will come into play in the markets after Christmas.