Futures Market Grinds Lower

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Major grains & oilseeds markets – It was a very slow week, little cash business was reported, and the futures market ground lower as price showed little resistance to continued harvest hedging. Funds were inactive in changing their outright positions; however, speculative funds did sell corn and buy some soybeans during the week. Weather conditions continued good for harvest, and some rainfall in Australia and FSU lowered some concerns over recent dryness. The Chinese continue to buy US soybeans.

Funds: There was very little change this past week in the overall fund positions in the market. Index funds did nothing while speculative fund sold a little overall (while selling corn and buying soybeans as well as the ratio was too cheap).

Soybeans - US soybean harvest was put at 62% complete, well ahead of both last year's 37% and the 54% average, ratings were unchanged with 92% dropping leaves (90% last year, 91% average). 

The Chinese continue to be good buyers. Crush margins in China are quite good which encourages the crushers to take more deferred coverage. In the next WASDE report the USDA will need to increase their Chinese import number; we are still of the opinion that their estimate for 2015/16 is too low.

Canola -  The Mercantile new balance sheet says we either need some more export sales or an increased crush pace. We need usage similar to 2014-15.  Canola needs to drop about 5 percent to pick up demand, which will need to be due to lower cash prices or a weaker Loonie. If the Loonie were 73.5 versus the US dollar - canola would be very competitive, so the election result could have some bearing on our markets. 

Flaxseed -  Per SAF, about 61% of Saskatchewan flax is in the bins as of Oct. 12th.  Provincial yield numbers suggest a bigger crop than StatsCan is expecting [see Table p. 19].  We expect a bigger crop an smaller exports this year. We cannot see anything bullish in this market at the moment. 

Wheat – US inspections were 291,000 tonnes (season total 306 myn bushels, down 17%) sales were 460,000 tonnes (season total 435 myn bushels, down 18%). Iran was unable to barter its 200,000 tonnes of durum for 25 percent more milling wheat.  Wheat Outlook: Last weekend’s sales were cheap and had other origins like Australia lowering their prices. Prices are going to continue under pressure until harvest is complete and wheat is under cover.

Durum - The Iranian attempt to barter 200k mt of their durum in exchange for 250k mt of milling wheat was rescheduled to a few days later (the deadline was extended to midweek of this past week); results still appear to be lacking. In the news, Morocco will reduce its import tax from 75% to 50% on Nov 1.

Feed Grains/ Barley –  Corn continues to be the cheapest feed grain, and there is no activity in the barley market where offers are hard to find and prices remain above $190 USF per mt for feed. The market is watching China closely for direction in case there is any change in the import policy.

Peas –  Deferred yellow pea prices for February deliveries have jumped to $9.85/bu in Alberta on Thursday afternoon, but we hear that as much as $10/bu have been paid.  New crop 2016 yellow pea bids are at 8.75/bu (Alberta) for Sept. – Nov.’16 delivery.

Lentils –  It is not certain if lentil prices can top the recent highs, but the possibility is there if India’s problems persist.  Longer term towards spring, we anticipate strong interest in increasing lentil acres again next year (and not only in Canada) because of the excellent returns per acre for lentils. This could pressure values towards spring.

Faba Beans - Faba beans prices have continued to slide over the past month in the international market. Australian product is competing against cheaper European origin faba beans into the important Egyptian market. UK and France have had crops crops with good quality.  Recent bids in Australia roughly equate $8.10/bu SK for good quality, with # 2 quality at a 40c/bu discount. Canadian grower prices are around $7/bu.

Canaryseed -  It is all about the actual yield obtained this year: SAF uses an average yield of about 1,100 lbs/ acre, while StatsCan uses only 813 lbs/ acre. The resulting production difference is 42k mt, or 35%!  If SAF is correct, then the canaryseed balance sheet is not near as tight as assumed earlier.  

[If you are interested in more background intelligence and our new crop supply & demand numbers, pls contact Mercantile]

 

 

Visit  http://mercantileventure.com or Contact mboersch@mercantileventure.com for more detailed intelligence and to enquire about weekly Mercantile private label Market Intelligence Reports. 

About the Author
Marlene Boersch

Marlene Boersch (MSc Ag.Econ.) & Anthony Paul Temple bring 70 years of experience and insight into the global world of agriculture to Mercantile. The strength of their company is derived from their practical expertise at senior levels in the grain industry within Canada and abroad. Their combined background provides the partners at Mercantile with a unique knowledge base, distinctively applicable expertise, and with exceptional connections to Canadian, U.S. and overseas customers.


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