Canola contracts traded on the ICE Futures Canada platform bounced around during the week ended Sept. 24, consolidating their recent strength, but eventually managed to climb higher on the back of a rally in the Chicago soybean market. Prices had hit their highest levels since June 2009 by the end of the week, with technical buy-stops hit on the way up.
The weather remains a supportive influence on the canola market, as the cool, wet conditions over the past few weeks delayed harvest operations and likely resulted in some quality downgrades. The forecasts are turning warmer and drier, which should allow some actual field work to resume. Depending on how the crops come off, confirmation of poor production could send some further strength into the market, but the more likely scenario is that canola could enter into a seasonally weaker period as deliveries off the combine enter the pipeline.
Looking at the canola technicals, a move to
C$500 per tonne doesn’t seem all that unreasonable anymore in the November contract. However, you’d have to go back to September 2008 on the weekly charts to see the last time the nearby canola contract had a “5” in the front, which means prices will likely run into some stiff resistance on any attempts higher.
Barley futures were steady to higher during the week, although actual volumes were light. The Canadian Wheat Board upped its price projections for feed barley sold during the 2010-11 crop year, citing some of the global feed grain tightness. However, Canada’s production problems this year will likely leave a fair bit of the wheat crop destined for the feed channels, which may temper any further upside in barley bids, depending on how actively the CWB is able to pursue the export channels.
In the U. S., values were mixed during the week. Soybeans in Chicago edged steadily higher before climbing sharply on Friday. A move above US$11 per bushel in the November contract helped encourage that move from a technical perspective, with South American weather issues also supportive.
Corn trudged along during the week, actually moving lower for the most part before Friday’s rally in soybeans spilled over to drag corn up as well. The two commodities will be in stiff competition for acres heading through the winter, as demand remains strong, but production problems in many areas of the world continue to cause some concern about supply.
Wheat futures were mixed during the week, with the most active nearby contracts posting losses in all three U. S. markets. While the drought problems in Russia and the potential quality issues in Canada should remain supportive, those concerns have been priced into the futures and the lack of any fresh news had the futures trading within a narrow range.
As the North American weather situation slowly fades to the background, attention is turning to the weather in South America, where the next major global oilseed production will come from. Brazil is the second-largest soybean producer in the world, after the U. S., and the potential for smaller acres and yield reductions could gain ground as a supportive factor in the international oilseed markets, spilling into canola as well.
Brazilian farmers would usually be planting their soybean crops at this time of year, but extreme dryness is causing many producers to delay those seedings this year as they wait for more moisture. To get a sense of the extent of the dryness, there are reports out of Brazil showing that the Amazon River is currently at its lowest level in 47 years. The drought conditions in Brazil were tied to the developing La Nińa weather pattern in the Pacific Ocean, and while some areas of the country were finally starting to see some precipitation on Friday, those areas were not the primary soybean regions.
While the Brazilian dryness could lead to cuts in production, timely rains in the next few weeks could see soybean acres actually increase on the year. The window for planting corn in Brazil is already starting to close, and acres not seeded to corn because of the dryness could easily shift to soybeans instead, if the weather co-operates.
Phil Franz-Warkentin and Brent Harder write for Resource News International (RNI), a
Winnipeg company specializing in grain and commodity market reporting.
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