For three-times-daily market reports from Don Bousquet and RNI, visit “ICE Futures Canada updates” at www.manitobacooperator.ca
Grain and oilseed pr i c e s at ICE Futures Canada in Winnipeg closed the week ended Nov. 13 higher, with canola lifted by gains in the Chicago soy complex. Slower farmer selling, as the harvest winds down, also gave some support. Friendly technical signals helped to lift the market. Gains in canola were smaller than the U. S. soy complex as the strengthening Canadian dollar restrained the advance. China’s refusal to accept canola with blackleg was unresolved, and that also weighed on the market. Western barley was little changed in the winter futures contracts, but saw declines in the spring and summer contracts. Those contracts were pressured down by expectations for rising ending stocks of barley.
Chicago soybean and corn futures posted gains during the week. Soybeans were boosted by exceptionally strong export demand as China took almost one million tonnes of U. S. soybeans last week. A slower pace to farmer selling, as the harvest started to wind down, contributed to the gains. Friendly technical signals and the weak U. S. dollar also gave support. Corn futures moved higher on expectations for a smaller U. S. crop, with crop quality problems also giving support. Rain in the forecast, which would halt harvesting, also helped to lift the market. Friendly technical influences encouraged some of the gains in corn.
U. S. wheat futures posted solid gains, despite all the news being bearish. Sluggish exports, rising ending stocks of wheat in the U. S. and the world and better weather for planting the U. S. winter wheat crop should have sent the market lower. However, wheat ended with solid gains. Traders are blaming that on the move of speculative money from commodity funds into the wheat market, which is lifting prices.
The Chinese have proposed an unsatisfactory resolution to the problem of canola exports that contain blackleg. The Chinese have said that a certificate is still needed to be issued by Canada and that any canola with blackleg would go to ports that are distant from rapeseed-growing areas.
The problem is that these ports are far from the main crushers as well, and would make Canadian canola too expensive. As well , there is still no definitive test for blackleg.
However, it’s still interesting to note the overriding attitude in the grain trade is that a resolution will be found and will be announced by early December.
The U. S. Depar tment of Agriculture brought out its latest production and supply/demand reports on Nov. 10 and they suggest that the lows have been put in for corn and possibly for soybeans and that the corn situation will lead the entire market higher.
It’s an amazing about-turn that the corn market, which was considered the most bearish two months ago, is now becoming the driver of the markets higher. Shows you how much you can trust analysts.
USDA pegged the U. S. corn crop at 12.921 billion bushels, below trade forecasts and below the October forecast of 13.018 billion bushels. Lower yields, due to poor weather, accounted for the bulk of the decline. U. S. 2009-10 ending stocks were pegged at 1.625 billion bushels, down from the October forecast of 1.672 billion bushels.
Globally, USDA pegged world 2009-10 ending stocks at 132.4 million tonnes, down from the October forecast of 136.3 million tonnes.
Both ending stocks numbers are felt to be inflated. The U. S. ending stocks number is likely to come in around the one-billion-bushel mark ultimately as production is expected to be cut. In addition, the poor quality of the crop will prompt increased usage to offset the quality problems.
The global number is felt to be overstated by as much as 10 million tonnes, as USDA is carrying a Chinese corn crop estimate of 155 million tonnes, while much of the trade feels China’s crop is actually 145 million tonnes.
As a result, traders feel the lows are in for the corn market and that corn prices are getting ready to break above the $4-per-bushel level and will likely stabilize in the $4 to $4.50 area.
USDA pegged the U. S. 2009 soybean crop at 3.319 billion bushels, above trade forecasts and up from October’s 3.25 billion bushels. Better yields accounted for the record-large crop.
The U. S. 2009-10 soybean ending stocks were pegged at 270 million bushels, well above trade forecasts and up from October’s 230 million bushels. Higher exports and a higher crush pace kept the U. S. ending stocks from seeing an even bigger increase.
Globally, USDA estimated the 2009-10 soybean ending stocks at 57.39 million tonnes, up from the October forecast of 54.79 million tonnes. Of course this is based on record South American production, which is not a sure thing at this point as the crop is not planted.
On top of that, Chinese soybean demand continues to expand making record U. S. and South American output necessary. Expected to help pull U. S. soybean ending stocks down, as well, is the fact that the poor quality of the corn crop will result in greater demand for soybean meal.
Everything points to U. S. soybeans trading in the range of $9.50-$10.50/bu. in 2009-10. This is a solid backdrop to the canola market.
WHEAT OUTLOOK FRIENDLIER
The USDA report had only bearish news for the wheat market. It pegged the U. S. 2009-10 ending stocks at 885 million bushels, above trade forecasts and up from October’s 864 million bushels. This is a 20-year high and suggests lower prices. Lower exports accounted for the increase.
Globally, it pegged 2009-10 wheat ending stocks at 188.3 million tonnes, up from the October forecast of 186.7 million tonnes. All of this suggests lower prices, yet the market is up. Some blame it on the falling U. S. dollar and the move into commodities by speculators.
The strength in corn and soybeans is also giving some support to wheat. There is also a view that the quality problem in the U. S. corn crop will result in increased feeding of wheat to livestock. This is expected not only in the U. S. but globally as corn prices rise.
The feeling is that the wheat outlook, while not bullish, is certainly friendlier than many analysts are forecasting.
The true size of the U. S. soybean and corn crops will not be known before January, as the December USDA report does not interview farmers to achieve its production numbers. Analysts note that these early yields in the November report represent the best of the crop and that the harvesting done later, which won’t be revealed till January, will show the yield in the crops that were plagued by excess moisture, freezing temperatures and the delayed harvest.
– Don Bousquet is a well-known market analyst
and president of Resource News International (RNI),
a Winnipeg company specializing in grain and
commodity market reporting