Mercantile MarketInsight October 10, 2014

Marlene BoerschMarket Insight

Major grains & oilseeds markets

It was a very slow week in both futures and cash trade. Futures closed a tad lower.

The size of the Russian wheat crop continues to impress. Most now call the crop 83 mln tonnes, some are as high as 87 mln tonnes.

The next WASDE report is the 12th of October so we don’t expect much trade before commercials have seen this report. The following are current estimates of what the USDA will publish. Most analysts who thought the USDA was too high on yields now agree or are higher than the USDA’s estimates.  We don’t expect to see anything bullish in the WASDE report.

Weather delayed harvest a little, but nothing worth worrying about with modern equipment.

Funds did virtually nothing on the week.


  • We expect more sales to China to be registered next week. In the short term, this should keep oilseed prices supported, whilet US farmers are more interested in fieldwork than selling.
  • new crop beans look like the crop with best returns to planting, particularly in South America where the corn yields are not as good as in the USA.
  • As a long-term trade, we like to be long Dec ’18 corn, short Nov ‘18 soybeans.


  • During week 9, farmers delivered a whopping 581,000 tonnes in week 9, exports were 338,000 tonnes and domestic usage was 167,000 tonnes. The visible was a comfortable 1.3 myn tonnes.
  • Canola movement to the east confirms recent rumors of sales to the EU. We expect the EU to take close to 500,000 tonnes of canola through to January.
  • The weaker loonie has helped canola become more competitively priced to soybeans. – We still think it’s too expensive to get China excited, but it is getting closer.
  • Demand is good, so we are still quite eager to cover our short and have orders to buy in the pit at $485 basis the November.


  • World wheat supply will likely be slightly increased in the October 12th USDA WASDE report, due to (again) higher production in Russia of 4-6 million mt, but with probable reductions in Australian wheat production of 1-3 million mt due to drought.
  • Cash wheat bids are currently at $6.09 – $6.59 across the prairies for #2 CWRS 13.0 protein. Looking forward we still see limited demand for US or Canadian spring wheat at the current premium to HRW or soft wheat.
  • Russian wheat will continue to do most of the cash business for the present. EU wheat is starting to get competitive, North American wheat is presently not competitive in cash markets. We don’t see wheat prices improving over the short term except Mpls Dec wheat, which could become technical due to Canadian out of position short hedges.


  • Tunisia bought 100k mt of durum wheat from unknown destinations for prices ranging from $286 – $289 CIF Tunisia. This works back to ~$6.84-$7.00 per bushel Canadian Fob Saskatchewan.
  • Cash durum is currently bid at $8.10 per bushel for #1 CWAD 90 HVK Fob Northgate SK, and this is good value given the Tunisian purchase and European production estimates.

Barley/ Feed grains

  • Feed grains will follow wheat prices – there are no shortages as will be seen in the WASDE report on the 12th of October.


  • Grower deliveries, terminal receipts and bulk exports are basically all at 65% of last year’s volumes. And the pipeline is not being replenished, there are a laughable 2,300 mt of peas on rail to the ports this week. This reflects the lack of new export sales for November forward.
  • This will not change until Eastern European export offers from Russia, the Ukraine, Romania and Bulgaria have been absorbed by the market. This does mean that North America is about to lose 800k mt – 1 million mt in total pea demand towards Eastern Europe. It will work out this year because the Canadian production is also about 800k mt smaller this year than last year, but longer-term, this is worrisome and we must do all possible to stay competitive.
  • Later this crop year (J/F/M) we still expect improved demand Jan/Feb’18 forward. Eastern European crop will have been shipped and local stocks in India should be depleted. The Australian chickpea crop should also be about 1/3 smaller than last year due weather, and this will help yellow pea demand to have product to blend into chickpeas.


  • Lentil handling also lags last year’s numbers significantly and cleaning pants are becoming anxious about lack of bookings November forward: a) falling prices induce buyers to wait for the low point; b) Especially India still has stocks from summer shipments; c) There is new competition from Eastern Europe, even for large green lentil business; d) The Indian Gvmt. is selling buffer stocks back into the market and/or is displacing import demand with buffer stocks. This market will require patience into the New Year, and should support higher prices towards the latter part of the crop year.
  • However, given Canada can reach a 2.1 million mt export target, ending stocks at crop year end should be back to a small stock-use ratio.


  • SAF has upgraded SK yields from 959 lbs/acre to 1,172 lbs/ acre. This gets them a bit higher than the StatsCan yields of 1,146 lbs/ acre and should upgrade this year’s production to ~135k mt.

We think the canaryseed acres were slightly higher at 280k acres; combined with SAF yields should give us 149k mt production, just enough to fulfill export demand.

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