Losing weight and exercising more are common New Year’s resolutions, with many people looking to improve their fitness after the excesses of the holidays. It’s rare for those grand ideas to hold up though, as treadmills gather dust and gym memberships go unused.
The agricultural futures markets had their ups and downs in 2023, with the overall trend moving lower. It would be great news for someone wanting to lose a few pounds if the price charts plotted weights on a scale, but the reality was not so great from a farmer’s perspective.
Nearby canola futures lost about $200 per tonne, or 23 per cent, over the past year. Prices in late-December of roughly $660 per tonne were a far cry from values at the start 2023.
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The canola market fell through the winter and spring but did manage to find some strength early in the growing season, when there was still plenty of uncertainty over the state of the crop and a weather premium developed.
The gains proved short-lived and seasonal harvest pressure was exaggerated by an aggressive move to the short side of the market by speculative traders. Managed money went from a relatively neutral position in canola to holding a record-large net short of over 100,000 contracts to close out the year.
Those bearish bets mean the funds would be quite content to see prices drop lower, as that would boost their profits. However, there will eventually come a time when they turn those paper profits into reality, leaving the door open to a large corrective bounce.
The chart for wheat follows almost the exact pattern as canola, with nearby Minneapolis futures losing about US$2 per bushel (or over 20 per cent) on the year despite a bounce early in the summer. Like canola, the speculative net short position in spring wheat was at a record large level to close out 2023.
Chicago corn lost about 23 per cent as well, with the most active March futures ending the year at a contract low around US$4.70 per bushel.
Soybeans bucked the trend somewhat, only down by 11 per cent over the course of the year. However, soyoil is usually more closely related to canola and it dropped 21 per cent.
After losing so much metaphorical weight, it would be nice to see the grains and oilseeds put on a few pounds in 2024. Time will tell if that happens, but there are a few things on the radar that could be supportive.
Weather conditions in Canada and around the world, shifting monetary policies, global conflicts, renewable fuels, technical charts, and the underlying supply/demand fundamentals – among many other factors – will all play a part in determining whether the agricultural commodities keep with their 2023 pattern of trending lower or turn the corner and make a new resolution.
