Canola futures on the ICE Futures Canada trading platform suffered a minor setback during the week ended Aug. 5 with the downtrend in the Chicago Board of Trade (CBOT) soybean complex and the liquidation of positions by speculators and commodity funds who were spooked by the uncertain global economic situation, behind the bearish price sentiment.
Adding to the price weakness in canola were ideas that the weather on the Prairies has been mostly favourable for the crop. There are concerns about dryness in some select areas, but overall participants feel the crop is developing well.
Steady hedge selling by the grain companies seems to back up that theory, as producers, now under the impression they will be able to harvest some sort of a crop, have begun to empty out old-crop canola stocks to make room for the new-crop supply.
The downside in canola was restricted by steady demand from the domestic processing sector, as well as talk of fresh export business being put on the books. Pakistan was a confirmed buyer of Canadian canola in the latest reporting period. Sources linked the fresh export demand to the downswing in the value of the Canadian dollar.
Western barley futures contracts on the ICE platform were again ignored by the industry in the latest week. The cash trade for barley, meanwhile, was mixed. Demand and scarce supplies provided support for feed barley values in Saskatchewan. Bids in Alberta were on the defensive while values in Manitoba were said to have held steady.
CBOT soybean futures suffered fairly significant losses during the week ended Aug. 5. The absence of fresh demand from the export and domestic sectors stimulated some of the price declines. Adding to the bearish price sentiment were indications the crop has generally benefited from weather conditions so far. Outlooks calling for mostly good conditions during the critical August growth period also was an undermining price influence.
The losses in soybeans were also facilitated by economic jitters by speculative and commodity fund account holders.
The weakness in soybeans was tempered by the advances seen in CBOT corn, as weather issues there continue to be played up by the trade. There was no end of reports suggesting that corn yields in the U.S. have been hurt by hot weather at the wrong time of development.
As a result, CBOT corn futures climbed higher during the reporting period. Some buy-stops were triggered on the way up, helping to exaggerate some of the price strength.
The upside in corn was offset by a pickup in farmer deliveries into the cash market, as those producers took advantage of the jump in the futures price.
Wheat futures at the CBOT, Kansas City and Minneapolis exchanges posted some small advances. Disease concerns helped to underpin spring wheat values in Minneapolis. The rally in corn also generated some support. The upside in wheat was restricted by the ample supply of cheap Russian wheat available on the world export market and by the continued rise in the value of the U.S. dollar.
HEAT OF THE MOMENT
Some of the speculation regarding the size of the U.S. corn crop should be alleviated soon, (Aug. 11) when the U.S. Department of Agriculture releases its next supply/demand balance sheets.
There are a number of individuals who feel that the hot weather damage to the crop has been overplayed and that the USDA report will confirm this.
However, for all the detractors, there are also numerous supporters of the hot weather damage to the U.S. corn crop. Some of the major forecasters in the U.S., in fact, have raised their corn price projections based on ideas that continued hot weather in August could still significantly reduce yields. The rally in corn will be required to destroy demand, these forecasters believe.
The USDA is currently working with an average U.S. corn yield of roughly 159 bushels an acre. Some forecasts from the private sector believe U.S. corn yields are closer to the 153-bushel level.
With the reduced yield output for U.S. corn, there were ideas that CBOT corn values could easily surpass the US$7.15/bu. level.
Any rally in corn, meanwhile, will likely pull CBOT soybean and wheat futures up as well. There were reports that CBOT soybean values could move to the US$14/bu. level and CBOT wheat could top US$7.50/bu.
– Dwayne Klassen and Brent Harder write for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.