With the North American harvest wrapping up for another year and the next growing season just getting underway in South America, we’re on to reaction season.
The back-and-forth flow of speculative money in reaction to whatever geopolitical news is available can be expected to account for much of the activity in the grain and oilseed futures over the next few weeks.
Thawing trade relations between the United States and China gave the soy market a boost to end October, as Presidents Donald Trump and Xi Jinping met in South Korea and apparently reached a deal. Actual details were still lacking nearly a week later. However, the headline news that China would be buying at least 12 million tonnes of U.S. soybeans over the next two months and another 25 million tonnes per year for three years in exchange for the easing of some U.S. tariffs was enough to take bean futures to their highest levels in 16 months.
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Canadian Prime Minister Mark Carney also met with Xi. Both leaders had positive things to say about improving trade relations between their countries after the meeting, lending a glimmer of hope to the canola market. However, there was no concrete movement, and the Canadian oilseed is still facing stiff tariffs into what had been its largest customer.
Canola will eventually find a home as the world trade flows adjust themselves. However, the price at which that business occurs remains to be seen.
Weekly export data from the Canadian Grain Commission shows Canada exported 1.2 million tonnes of canola through 12 weeks of the current marketing year. That compares with 2.9 million tonnes at the same point a year ago. At that pace, yearly canola exports are only on target to hit 5.2 million tonnes, which would be well short of the 9.5 million tonnes moved in 2024/25.
Looking at the charts, the seasonal lows appear to be in for the time being, but the upside is also limited, and canola futures could chop around in a sideways range without any developments on the trade front. The January contract appears to be facing stiff resistance around $650 per tonne, with support in the $630 to $635 area. Meanwhile, soybeans gapped higher on the charts with a move above US$11 per bushel in the January contract now creating a new support level. If that US$11 fails to hold, the next support comes in at around US$10.60 to US$10.70/bu.
U.S. soybean export shipments are also off to a slow start, with the 7.8 million tonnes moved through nine weeks, the lowest level for this time of year since 2011. Traders will be watching to see if the rumoured Chinese purchases materialize in the weeks ahead, although there is some added uncertainty as the ongoing U.S. government shutdown limits the available data.
