What goes up, must come down’ may be a tired cliché, but it proved true in the grain and oilseed markets once again as summer officially begins.
Canola, soybeans, palm oil, wheat, corn — you name it, and it fell hard during the week ended June 23. The seasonality of the North American agricultural markets typically sees prices come under a bit of pressure at this time of year, as seeding operations wrap up and it’s still too early for significant weather concerns to materialize. That’s the case in 2022 as well, but the heavy selling in the agricultural sector was largely a result of speculative money bailing out of all positions.
Canada’s annual rate of inflation came in at a whopping 7.7 per cent in May, according to a report from Statistics Canada. That marks the largest level in nearly 40 years. Inflation elsewhere in the world is also high, prompting national banks to raise interest rates in an effort to counter rising prices for everything from gasoline to food. The concern now is that those measures will hit too fast and too soon, resulting in a recession.
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The lingering effects of the COVID-19 pandemic and the new impact of the ongoing war in Ukraine also complicate matters.
As a result, the speculative money that had built up in many markets over the past year was looking for an exit. The selling built on itself with chart stops hit on the way down. The November canola contract lost nearly a quarter of its value from its late-April highs, but at around $850, still represents the best new-crop price ever seen at this time of year.
With the speculative money flushed out of the market, canola could be expected to chop around in a range over the next few weeks as commercial traders wait to get a better handle on production. While seeding was delayed in the eastern Prairies, timely rains to the west have eased drought concerns somewhat — setting the stage for a decent crop this year.
Soybean and corn futures in the U.S. may also find some day-to-day direction from weather.
For wheat, the U.S. winter wheat harvest is well underway and progressing northwards. Hot and dry growing conditions cut into yields, but protein levels have been coming in above average so far.
Spring wheat seeding was hampered in both the northern U.S. and Canadian Prairies, with areas unlikely to live up to earlier expectations.
The U.S. Department of Agriculture releases its latest acreage estimates on June 30, with that report often providing the catalyst for sharp moves in the futures. Canada’s planting numbers will be out a few days later, on July 5. The Canada Day and U.S. Independence Day holidays in between the two reports also have the potential to result in some volatility as participants move to the sidelines.
