Feb 17-23 Yellow Pea Notes

New crop Canada peas reportedly offered US $400/t bulk landed China, about US $45/t lower than old crop bulk.  With an allowance of US $30/t for ocean freight, 0.75 currency, less a comfortable autumn new crop all-in-cost/margin of say C $90/t, trade could bid $11/bu generic SK elevator if (i) needed to and (ii) could sell US $400/t landed China.

Russian origin peas are reportedly trickling into China now, small tonnage.  Do not believe bulk logistics via Black Sea is a practical volume option, as is a volume of inconsistent quality at one time, but believe the truck/rail ground method and acceleration process is engaging.  Peas are not a flax, but it took ~ 3 years for flax to metamorphose into a more meaningful trade shift.  We can now only monitor how snippets of cheaper pea choice alter trade flows and sentiment.  We know China can be a commodity import sponge if price is competitive against another feedstock, but if peas aren’t, then nit-pick emerges.

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Jan 11-23 Wheat

The two most important fundamental components of wheat are not necessarily common topics within coffee-shop talk, it is that

(1) both Russia and Australia have large enough sized crops to be able export volume (capped by capacity) right through respective 2023 harvests begin.  Cheaper price ensures this happens, Russia leads in Africa/Mid-East while Australia in Asia.
(2) user behavior has shifted to combat high price, part of it is deploy patience, even hope that a cheaper choice will become available.

Where domestic supply/demand imbalances exist, strong basis and futures inversions can do most of the work.  Can come up with a few reasons for modest strength including return of disruptive war or corn drought, but the likelihood of reversion to a price uptrend seems low.  Bounces yes, uptrend unlikely.

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Dec 09-22: How Does USDA Report Numbers Fit Into Big Picture

  • Wheat is deserving of evolving into an uptrend if (i) led by corn, (ii) Black Sea wheat price participates and leads, (iii) geopolitical disruption occurs, (iv) 2023 weather wreck.  Since the answer to all of these today is no……explains directional bias.  Through a Western Canada lens, wheat is leaving fast, such that we’ll eventually reach sold out status with gravitation to basically zero shipping margins.
  • The world including China will play the cheaper choice trump card at the price discovery table all day long, and unless it makes economic or strategic sense, will only selectively chase other origin higher priced choices.
  • While we can micro-manage South American corn production prospects, smaller but regular availability of cheaper Polish/Ukraine corn is your 250 mil bu of US origin export demand variance squelch button.  The bigger prize is this…..killing time until 2023 US production prospects cement.
  • Soy has demand moments linked to timing of China buys.  Brazil to be the core cheaper export hub Feb forward, with Argentina weather a perception influencer, but whose market read supply is to only engage when government offers a Peso program now.
  • Week ago US Environmental Protection Agency (EPA) announcement has stymied the “now” vegoil bull.  Capacity increases and growth from Sustained Aviation Fuel and Renewable Fuel is not really a major 2023 story, rather “later” in 2024.

Above fits into narrative that has been researched with trend ideas always refined.  Please reach out for more detail.

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Soybean Oct 26-22

Simplified daily outlook is soybeans tend to rally when China is buying and tend to have down days when not.  Did you know that China’s Lunar New Year is Jan 22-23, twenty days sooner than last year?  This lessens import calendar buying time, and after a rough 10% festival domestic hog slaughter, China shall come out the other side anticipating access to cheaper South American supply.

Western Canada soy basis levels tend to be juiced now.  Doubtful this persists later winter when South America is more active.  Some elevators in sparser production areas may have allotted capacity for a soy train now, but not later.   Most completed soy harvest in October.  Many risk-reasons to sell some physical.  Please reach out for more detail.

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Sept 12-22 Flaxseed

Buoyed by decent crop size and relative high price, both Russia and Kazakhstan are motivated sellers.  Offshore industrial demand is somewhat more fragile due to economic malaise in China and Europe.  Consumers are pulling back on discretionary choices.

However the numbers are carved out, Canada needs about 200,000t of demand from China and/or Europe.  A version of it will eventually happen, but won’t today if domestic flax prices stay north of $20/bu.  As at Sept 9-22, if Canada had to sell to Europe, competitive price is about C $16.50/bu delivered elevator, making existing price structure exclusively domestic.  Please contact me for more info.

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Red Lentil View Aug 09-22

No matter what crop size Canada harvests, there is no lentil shortage without India being an import threat.  In that regard, opinion is that India has a food inflation challenge.  Domestic wheat and rice prices are strong.  Pigeon pea prices are on fire.  India domestic red lentil trend has been flat for several months, but the risk is for the trend to turn northward into autumn.   India announcing an extension of zero lentil import tariff through to March 31-23, two months sooner than need be, is viewed to give trade advance certainty should trading market conditions align.  Australia and Kazakhstan are to provide other importer choices.

For larger price moves to happen, must involve (i) user panic, (ii) farmer panic, (iii) frontload trading demand with a long or short positional bias taken by traders.  Feels realizing to me.  Have carved out a risk reward conclusion, and it starts with staying glued to India domestic pricing.  Please contact me for more detail

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Feed Barley July 10-22

Absent a 2022 quality wreck or large wheat/barley yield, a 10 MMT sized barley crop would still require Western Canada to import about 2.5 MMT of US corn versus about 5 MMT in 21/22.  This means domestic barley cannot shy too far away from landed corn value, yet must stay at a premium to landed China to ensure domestic gets enough.  Suspect wheat does it thing, competitive some of the time as a feed for those in deficit areas, but limited elsewhere because food export value should be a superior delivery choice.

22/23 W Can supply demographics will mean more barley (mainly yield) produced in feed deficit areas, and less/similar supply in surplus areas (lower area x bigger yield) that would otherwise be exported or face a hefty freight bill to deficit domestic.  This means less demand pull pricing into deficit regions whose occurrence is either later, slower to engage or less intense.  Local harvest pressure risk is inflated.  Overlapping all this, the two largest barley importers Saudi Arabia & China faced reduced import prospect.

All of these variables have been weaved into an outlook piece.  Please contact for more info.

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June 07-22: Pulses Grinding Along

Situation and prices seem to be in a sweet spot because

(i) Farmers have limited interest to supply-push sell. Why?  Competing crop prices are strong, supplemented with a calendar date where it’s easy to be concerned about agronomic risks.

(ii) Consumers and importers have limited interest to demand-pull buy, rather pick away in hand to mouth fashion. Why?  Financial, logistical & political headaches, anticipation of a cheaper new crop reload with price perceived to be high only because of war.  Further, India is not perceived to be a volume import buying threat, while new crop growing conditions are good enough to justify idling.

(iii) Anticipatory trading demand, which is code for speculative positioning, is subdued because a confident directional price bias is lacking. Between war, politics, logistics, inflation, weather possibilities, benign supply/demands and perception of steady to strong consumptive demand, most cannot deviate from a see how it goes bias today.

Exceptions exist.  Example chickpeas.  Please contact me for more detail.

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Apr 27-22 Durum

Algeria bought 230-250,000t of durum for last half May/June shipment at a price that works back to about $15/bu delivered Saskatchewan.  This confirms the volume transition to accessing cheaper new crop.  Instances of localized $16.50/bu have worked to Morocco and small parcels to US/Canada domestic, Japan and South America.  The volume focus is on new crop where Italy has been a buyer of 2 CWAD equivalent around $14.50/bu delivered Saskatchewan.  8 million North American seeded durum acres is ample for a supply rebuild if yield and quality normalize.  In the meantime, if adversity happens, new crop should converge higher with old crop.  If not, old crop should converge lower with new crop.

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Mar 10-22: New Crop Canola

Small South American crop is a known-known, but the world is adjusting to the reality that it might need as much Canadian origin canola as logistically possible to accommodate new risks of what happens if (i) Ukraine 2.5 MMT winter planted canola crop faces input or harvest impairment, (ii) Ukraine cannot plant or logistically manage all or part of 7 mil hectares of spring sunflower plantings.  Most of sunny area is in E ½ of Ukraine, in the war zone.  Know that Ukraine exports about 6 MMT of sunoil per year and uses about 0.5 MMT for domestic.  If 6 MMT was a canolaoil, at 42% oil would required 14 MMT of canola.  At the margin, that is massive…and that right there is the reason why new crop canola is trending the way it is.  Main short term risk would be an immediate truce to war or a world wide government effort to relax biofuel mandates.  Unprecedented times requires unconventional thinking.

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