Canola futures on the ICE Futures Canada platform continued their slow trek to higher ground during the week ended Jan. 18, with strong demand from the domestic and export sectors fuelling the rally. Some spillover from the gains in Chicago soybeans contributed to the strength.
Concerns about tight canola ending stocks further lifted the commodity. There were also attempts by a variety of market participants to push the March canola contract through key technical resistance at the $600-per-tonne level, but the efforts failed.
Farmer deliveries of canola into the cash system in Western Canada were “hit and miss” during the week, with movement dependent on the region of the Prairies.
Domestic crushers in Manitoba seem to be the most desperate to acquire canola from farmers, with processors in the southern region of the province providing some pretty attractive offers.
There was word during the week that these southern Manitoba processors were offering basis that were $18.50 per tonne over the canola futures price if delivered during January. That value increased to $22 over the futures price if delivered in February. The basis was raised to $27 over the futures if farmers agreed to deliver in March.
That value was considered attractive, with cash bids then hitting the $14-a-bushel level, if not a bit better.
Processors in Western Canada have some good sales on the books, and are trying to secure enough canola to meet those sales commitments. There are ideas that between exporter and domestic demand, Canadian canola ending stocks will only be in the 350,000- to 600,000-tonne range, which is considered extremely tight. The tight carry-over projection has definitely been supportive of canola values as a result.
The downward push in the value of the Canadian dollar was also an underpinning price influence for canola during the week.
Milling wheat, durum and barley values on ICE’s Winnipeg platform continued their uneventful way, with no actual trades seen. Some arbitraging of value for milling wheat by the exchange was the only action reported.
Soybean futures at the Chicago Board of Trade (CBOT) posted some pretty significant advances during the reporting period. Strong export and domestic demand combined with the buying back of previously sold positions by investors provided much of the upward price momentum. Some support was also drawn from the dry weather which had moved into the soybean-growing areas of Argentina.
However, those advances were brought to an abrupt halt late in the week, amid ideas that the upcoming South American soybean harvest will begin in just a few short weeks. The South American soybean crop was still anticipated to be record-large and the availability of those cheaper soybean supplies was seen cutting significantly into U.S. soybean demand.
Weather outlooks from the U.S. National Oceanic and Atmospheric Administration (NOAA), calling for an above-average period of precipitation in the U.S. Midwest, including Minnesota, Iowa, Illinois and Indiana during the March, April and May period, also cause the rally in soybean futures to falter. Rain at that time would be a positive factor for U.S. crops early in their growing season.
As a result, some commodity analysts are recommending U.S. farmers sell some of their soybeans at these levels, indicating that once the South American production becomes available, a push back to the US$13-per-bushel range is inevitable for CBOT soybean futures. Some continue to feel those values will still be in the $11-per-bushel range by the summer.
CBOT corn futures also gained some ground during the week, with fresh demand from the global feed market behind the advances. The buying back of previously sold positions by investors also contributed to the upward price push. The tight old-crop supply situation also influenced some of the advance.
Dryness concerns in Argentina’s corn-producing regions also offered some support.
The price trend in wheat futures on the Chicago, Minneapolis and Kansas City exchanges was to the upside during the week. Much of the support came from continued concerns about the dryness threat to the U.S. winter wheat crop. Spillover from the advances in CBOT corn and soybeans also generated some of the upward price movement.
The upside in the wheat market continued to be hampered by the complete lack of demand for exportable U.S. wheat supplies. Commodity analysts also recommend U.S. farmers unload wheat positions as values were not expected to hold current levels.
These individuals point out that while prices are not as high as growers hoped they would get, the fact is that end-users are not exactly stepping up to the plate to purchase supplies. Ethanol producers are losing money, livestock producers are not making any money and exporters continue to struggle to sell corn or wheat.