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, Dec 11, 2023
There were two important statistical contributions to the fundamentals of our crops since our last report in November. These are Statistics Canada’s ‘Final estimates of production of principal field crops’, and their October export numbers by destination. Virtually all production numbers came in higher than in the previous (Sept.) report, some of them significantly so. We review these numbers by commodity below. October export numbers were mostly in the normal ranges; see below.
These are Statistics Canada’s ‘Final estimates of production of principal field crops’, and their October export numbers by destination. Virtually all production numbers came in higher than in the previous (Sept.) report, some of them significantly so.
Pulse & Special Crops Market Outlook - Fundamentals
Lentils
StatsCan’s (STC’s) 2023 lentil production came in at 1.671 mln mt, up a significant 8.4% from their Sept. number, but still 27% below the 2022 lentil production. The trade had expected production to be higher than the earlier STC number; their pre-report estimate was at 1.7 mln mt, although with a big range in estimates (1.6 – 2.2 mln mt). This means that the STC number is unlikely to have an impact on prices and bids to farmers, although buyers will doubtlessly try to ‘use’ the number to their advantage. Meanwhile, October lentil exports reached a respectable 199k mt, with cumulative August through October exports at 447k mt. This is 20% (-113k mt) smaller than last YTD, but -as mentioned- the crop also is smaller by 27%. – We expect the lentil market to remain firm.
Peas
STC pegged the 2023 Cdn. pea production at 2.609 mln mt, a full 14.8% (+337k mt) higher than in their September report, but still 24% smaller than in 2022 due to both smaller acres and lower yields. The trade had expected pea production to be higher than the earlier STC number, with a pre-report estimate at 2.6 mln mt. Because the STC report is merely confirming the expectations of the trade we do not expect it to have an impact on prices and bids to farmers.
October pea exports were tepid at 306k mt, but importantly shipments to China were decent at 241k mt. YTD (Aug. through Oct.) pea exports are just 2% below last year’s, mostly thanks to good movement to China.
The big news in the pea market late last week is that India has removed all import restrictions on peas for the Dec. 8/’23 to Mch. 32/’24 period. The temporary opening of India to peas brings additional demand not accounted for earlier and is very supportive to prices. Canada should be able to move some tonnage in that window. Our competition in the Indian market will be Russian peas. This development will also help the market reflect prices high enough to attract sufficient pea acres for next year.
Grain & Oilseed Market Outlook - Fundamentals
Canada Western Red Spring Wheat
STC put total Canadian wheat production at 31.95 mln mt, down 7% from last year,. This is 2.1 mln mt higher than STC’s previous estimate and slightly higher than the 31.1 mln mt that the trade was expecting. Spring wheat was put at 24.8 mln mt, down 4% from last year, but 800k mt above the average trade guess. Winter wheat remaining was essentially unchanged at 3.15 mln mt. STC’s larger production estimate will have limited impact on the market especially given the strong export performance of Canadian wheat.
Canada exported 2.1 mln mt of non-durum wheat in October for an Aug.-Oct. total of 5.5 mln mt, up 13% from last year. China remains the largest customer of Canadian wheat year-to-date, but at 539k mt, exports to China are just 51% of last year’s volume. Meanwhile, countries outside of the top importers having increased demand for Canadian wheat. Exports to “other” countries are up by 44% with notable increases to several African nations.
Durum Wheat
STC put durum wheat production 14k mt lower at 4.05 mln mt, down 30% from last year. The average trade guess was slightly higher at 4.1. The difference between the two estimates is not significant enough to shift the market.
October durum exports improved to 293k mt but remain behind the average pace. Aug.-Oct. durum exports total 659k mt which is just 78% of last year’s volume. Fewer exports to Italy are the main reason for the decrease. Italy has only imported 25% of last year’s volume from Canada year-to-date as they satisfied their early demand with Turkish durum. This will push Italy’s demand for Canadian durum into the winter. We have seen recent evidence that Italy is buying Canadian durum again.
Oats
STC increased Canadian oat production by 200k mt to 2.6 mln mt, down 50% from last year. This is in line with trade expectations and slightly below our 2.7 mln mt estimate. The sharp decline in production is offset somewhat by large beginning stocks. We estimate that total supply is ~3.7 mln mt which is 30% less than last year.
Canadian oat exports in October were 135k mt. Exports to the US accounted to 91% of the monthly total. Year-to-date Aug.-Oct. exports are 513k mt, up 23% from last year but have fallen below the average pace. Monthly exports will need to be above 200k mt per year to meet our export estimate.
Canola
At an estimated 18.328 mln mt, STC’s final canola production numbers were an astonishing 5.5% (or +960k mt) higher in their December report than in their September report. This leaves this 2023 production 2% smaller than last year’s, mostly due to a reduction in acres. The trade was expecting the higher production number with an average pre-report estimate at 18.3 mln mt. However, the range in estimates was a huge 17.2 to 19.7 mln mt, so there still seems to be no general agreement on the size of this year’s canola crop. However, the market reacted negatively to the news of a bigger crop against very tepid export demand. We note that ABARES in Australia also increased their ’23 canola crop estimates by 372k mt to 5.523 mln mt. The combined STC-ABARES changes add to roughly a 1.4 mln mt increase.
Cdn. October canola exports at 895k mt were actually quite good, and YTD (Aug. – Oct.) exports added to 1.57 mln mt compared to 1.5 mln mt last YTD. However, there are very few canola seed sales on the forward books and fresh enquiries are few and far between. Canola will follow soybean oil/ vegetable oil values.
Flaxseed
Last week, STC estimated flaxseed production at 273k mt, just 1.8% higher than in their previous report. However, if correct, this still is 42% smaller than the 2022 Cdn. flax crop. But remember, carry-in stocks have cushioned the drop in production, so that supply seems to be adequate. Exports have improved over last year’s. YTD exports total 34.5k mt, compared to 29.2k mt last YTD. How exports to China develop over the winter will be key. The fell to 284 mt in October, compared to 2,048 mt and 2,315 mt, respectively for August and September.
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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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