The following analysis was provided by Mercantile Consulting Venture.
The following is a fundamental analysis of today's pulse, special crops, grain and oilseed markets. Mercantile is a professional services company specializing in private-label market intelligence, risk management solutions, and project consulting. Each week, the Mercantile Market Commentary provides independent analysis and recommendations based on the international and domestic market developments for farmers and others whose daily business is agriculture. For more details and to subscribe to the weekly newsletter, visit www.mercantileventure.com.
Mercantile Grain Market Analysis, January 15, 2024
There were two important statistical contributions to the fundamentals of our crops since our last report in December. These are Statistics Canada’s November export numbers by destination, and some relevant numbers coming from last Friday’s USDA report.
Pulse & Special Crops Market Outlook - Fundamentals
Lentils
Indian importers have kept buying good volumes of lentils from Canada as well as from Australia, and this is what has been underpinning the Cdn. Nov. exports as well. Canada exported 250k mt of lentils during November ’23, which is significantly higher than the Nov. pea exports. 44% of the Nov. lentil exports went to India, but the UAE, Turkey, Egypt and Algeria also took good volumes. Keep in mind, that the 2023 lentil production was down by 27% from the previous year. Meanwhile, last Friday’s January USDA report pegged US lentil production at 260k mt, up just 2% from the ’22 production, although yields were up 20% from the previous year. For new crop lentils, big premiums are being offered for green lentils over reds. This is bound to increase interest in growing green lentils, while hoping to maintain red lentil acres as prospective returns to reds still top prospective returns of spring wheat, durum and canola. We think there is no rush on new crop for now.
Big premiums are being offered for new crop green lentils over reds. This is bound to increase interest in growing green lentils, while hoping to maintain red lentil acres...
Peas
Exporters are currently shipping bulk peas into the non-tariff window in India. But with the bulk of the buying for India being concluded, bids for yellow peas have mostly fallen back to previous levels. So far, there is no way of telling if that window will be expanded. But green pea bids have maintained the big premium to yellows as they do not have to content with competition by Russian peas in the green pea markets, and as supplies have become tight. Meanwhile, at 92k mt, Cdn. pea imports by China were smallish in November. And aside from China, only the USA, Colombia, the Philippines, and the UAE imported any kind of volume during November. In the US, Friday’s January USDA report put US pea production at 823k mt, up 17% from the ’22 production. Yields were up 10% from the previous year.
Friday’s January USDA report put US pea production at 823k mt, up 17% from the ’22 production. Yields were up 10% from the previous year.
Grain & Oilseed Market Outlook - Fundamentals
Canada Western Red Spring Wheat
Canadian wheat continues to move at a rapid pace. Exports in November were 2.0 mln mt. China continues to be the largest customer, importing 403k mt of wheat over the month. This was the largest monthly volume since October 2022. Despite this, Aug-Nov exports to China remain 32% (-435.7k mt) behind last year. Wheat exports to Indonesia, the US and Mexico remain strong as well as exports to “other countries” which are 42% higher than last year. The USDA increased global wheat stocks in Friday’s WASDE report and raised Dec. 1 US wheat stocks above what the trade was expecting. The winter wheat seeded area report showed fewer acres were planted to winter wheat than what was expected.
Canadian wheat continues to move at a rapid pace. Aug-Nov exports to China remain 32% (-435.7k mt) behind last year but wheat exports to Indonesia, the US and Mexico remain strong as well as exports to “other countries” which are 42% higher than last year.
Durum Wheat
There was some lively recent tender activity in the durum markets. Tunisia and Algeria purchased what is believed to be 300k-400k mt of durum at prices that reflect strong values at the elevator in Saskatchewan. Canadian durum exports in November were a season-high at 351.7k mt. Algeria was the largest buyer at 86.4k mt, followed by Morocco at 82.3k mt. Of the top importers of Canadian durum, Morocco is the only country whose imports are greater than last year-to-date. Italy’s imports are just one-quarter of last year’s volume, down 423.8k mt from last year as the country satisfied much of its early demand with Turkish durum.
Tunisia and Algeria purchased what is believed to be 300k-400k mt of durum at prices that reflect strong values at the elevator in Saskatchewan.
Oats
Canadian November oat exports were small at 92.1k mt. The US only imported 77k mt of oats over the month. Exports to the US accounted for 84% of the monthly volume (down from 91% in Oct.). Aug-Nov exports to the US are 468k mt which is 13% behind last year. Mexico imported another 11k mt in November bringing their season total to 60.1k mt. Exports to Mexico during the same time last year were zero. Japan has consistently been buying around 2.5k mt of oats per month for a total of 10.3k mt, up 6k mt from last year. Aug-Nov exports remain 9% ahead of last year, but this is entirely because of the large August export program.
A major factor contributing to the sluggish US import demand is that oat stocks remain high. December 1 oat stocks were 62.6 mln bushels according to the USDA. This is 17% more than last year. All of the increase in stocks is in off-farm positions (up 9 mln bushels) as on-farm stocks are essentially unchanged from last year.
A major factor contributing to the sluggish US import demand is that oat stocks remain high. December 1 oat stocks were 17% more than last year.
Canola
CBOT soybeans and meal were weak even prior to the bearish USDA report last Friday, but the report extended losses further. This is not helping canola. Canola exports have been falling behind last year’s and Canada currently is on pace to export only 6 mln mt of canola this crop year. To achieve projected exports, the pace will have to pick up fairly significantly. Crush margins in Canada have also weakened, but still remain good. However, it should be kept in mind that canola oil is used for diesel, and low diesel prices have meant that less is being used in biofuels and more canola oil is available for human consumption.
Canada currently is on pace to export only 6 mln mt of canola this crop year. To achieve projected exports, the pace will have to pick up fairly significantly.
Flaxseed
Flax export numbers remain tepid. In November, Canada exported a total of 14,259 mt of flax, with 34k mt (70%) of this going to the USA. Japan was the next largest buyer at 621 mt, followed by the UK with 501 mt. China only imported 191 mt in November. So far, we see no reason to increase our export projections, which should leave the Cdn. flax balance sheet well supplied. In the USA, USDA put US flaxseed production at only 75k mt last week, down 31% from the ’22 production. Yields were actually up 5% from the previous year. We kept our export projection to the USA at 145k mt, compared to 118k mt last crop year.
So far, we see no reason to increase our export projections, which should leave the Cdn. flax balance sheet well supplied.
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Mercantile develops domestic and international market intelligence to maximize our clients' benefit.
Established in 2003 by Anthony Temple and Marlene Boersch in Winnipeg, Canada. Our insights are based on more than 75 years of expertise and insight in the global agricultural market.
The strength of the company is derived from our practical expertise at senior levels in the grain industry both in Canada and abroad. Our experience is rooted in global marketing of grains, pulses and oilseeds, and in the investment of processing assets in numerous geographies, providing us at Mercantile with a unique knowledge base, distinctly applicable expertise, and exceptional connections to Canadian, U.S. and overseas customers.
All Mercantile market intelligence is created in-house and we provide studies, strategies, and recommendations for Agribusiness, Associations, Government and – most importantly – farmers.
Strategic thinking honed through working and trading in competitive global markets goes into all of our studies, strategies, and recommendations.
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