Overbought price sentiment and steady farmer deliveries into the Prairie grain elevator system were just enough to cause canola futures on the ICE Futures Canada trading platform to move slightly lower during the week ended March 1. The steady deterioration of Malaysian palm oil and European rapeseed values during the reporting period helped to undermine canola as well.
Downward price action was restricted in part by steady demand from the domestic processing sector and from talk of fresh export business coming forward. While confirmation of the business was not available, there was some speculation in the market that China was the outlet that made the purchase. Steady erosion in the value of the Canadian dollar during the week was also beneficial to canola.
Canola futures have certainly tested the patience of chart watchers during the week, with the May contract testing support numerous times. Support in the $608- to $610-per-tonne range held, despite a push down as far as $604. There are ideas that should the future drop below $600, the more aggressive bears would take the opportunity to sell.
There were ideas that, at the lows seen on charts this week, canola can still attract export business. With Chinese processors concerned about shipping delays out of Brazil, it’s possible there could be more purchases of old-crop U.S. soybeans in the next few weeks. If that occurs, canola may find some additional upward price action.
Reports from Brazil indicate vessel lineups at various ports continue to build. Over 90 vessels were waiting at Paranaqua while at Santos, 59 grain vessels were anchored waiting to load. Wait times to load ships were said to be 40 days and longer. The backlog was caused by a series of mini-strikes at various Brazilian ports, but there were reports union leaders have agreed to halt further planned work stoppages until at least March 15.
Activity in milling wheat, durum and barley on ICE Futures Canada continued non-existent. It was interesting to hear testimony at the Wild Oats Grainworld conference held early in the week from the MGEX, CBOT and ICE about each exchange’s wheat contracts. Feedback from the meeting noted that while ICE Canada officials defended their wheat and durum contracts well, MGEX spring wheat contracts were declared the clear choice of market participants.
Soybean futures at the Chicago Board of Trade (CBOT) experienced some fractional declines during the reporting period, with much of the bearish sentiment coming from the strong U.S. dollar and the improved weather for the development and harvest of the soybean crops in South America. Economic worries in the U.S. also fuelled some price weakness, albeit late in the week. The U.S. government had to make some serious budget decisions March 1, with the debate likely to continue through the weekend and worries spilled over into U.S. grain and soybean markets.
Losses in soybeans were contained by Brazil’s problems in shipping soybeans and by China picking up some old-crop U.S. soybeans to cover nearby needs.
There are ideas that U.S. soybean values are looking for new fundamental inputs to work with. That includes keeping a close watch on the ability to move soybeans out of South America and more seasonal items such as planting of the next U.S. soybean crop. There remains some lingering concerns about dryness in some of the U.S. soybean-producing regions. However, while the consensus is that U.S. soybean acres will be up from the year-ago level, there is still time for some weather issues to develop and scare values up a bit.
CBOT corn futures experienced some strength with tight old-crop supplies providing much of the upward momentum in value. The lack of deliveries of corn into the cash pipeline in the U.S. and the resulting jump in cash bids, also helped to generate some support for the futures market. Chart-based speculative and commodity fund buying was also evident and contributed to the price strength.
The strong U.S. dollar and the continued absence of demand from the export sector restricted the upside price push in corn.
Most of the price strength seen during the reporting period was confined to the nearby months. The upside in the deferred was minimal at best, given the potential for record corn area to be planted in the U.S. this upcoming season. There also continue to be some lingering issues about dryness in some of the main corn-growing areas, which devastated the potential for huge production last year. However, it appears there have been some timely rains in corn-growing areas of the U.S. Midwest, and more are forecast ahead of seeding.
There are already ideas U.S. corn acreage will hit brand-new record levels and should normal yields be harvested, CBOT corn values could easily be back trading in the US$4.50- to $5.75-per-bushel area come autumn.
Wheat futures on the CBOT, MGEX and KCBT continued to trend to the downside during the week. While the losses were not as large as in previous weeks, absence of fresh export demand and improved soil moisture in the U.S. Winter Wheat Belt were viewed as bearish for values. There were numerous attempts to rally, but each attempt seemed to run out of steam.
Fundamentals for wheat appear to be on the bullish side, given that world wheat production estimates are on the decline in response to damaging weather patterns. However, analysts in the U.S. point to the reluctance of speculative investors to hold positions in commodities, given the U.S. government’s money problems. The potential for overabundance of corn in the new season also is limiting upside price opportunities for wheat.