Canola futures on the ICE Futures Canada trading platform suffered a serious price setback during the week ended Sept. 23. Global macroeconomic concerns combined with an aggressive harvest pace on the Canadian Prairies to send values down sharply. All the canola contracts lost at least $20 per tonne each.
The penetrat ion of support in the November canola future at $540 added to the bearish price scenario. The sharp sell-off in CBOT (Chicago Board of Trade) soybean futures also contributed to the downward price slide seen in canola. Western Canadian farmers also continued to be steady sellers of their newly harvested canola into the country elevator system, which served to amplify the price weakness.
Underlying support came from confirmation of a Canadian canola sale to the United Arab Emirates (UAE) during the week for an
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unspecified delivery date. Steady domestic crusher demand and the pricing of old export business to Japan also helped to slow the price declines. The downswing in the value of the Canadian dollar helped to slow the decline.
Western barley futures on the ICE platform remained in dormancy during the week, with commercials finished realigning their October positions for the time being.
Feed barley cash bids, meanwhile, continued to experience some firmness, with increased demand and tighter supplies providing some of the strength.
CBOT soybean futures continued their downward price trek during the week ended Sept. 23, with the unwillingness of global investors to hold on to risky assets, such as commodities, accounting for a good portion of the price drop. The activation of sell-stop orders on the way down exaggerated the price weakness.
The continued upswing in the value of the U.S. dollar also did soybeans few favours, by making the commodity more expensive to purchase. Sentiment that CBOT soybean futures were oversold and in need of an upward correction, helped to temper some of the price declines.
CBOT corn futures also posted some significant losses during the week. Here too, global economic jitters fuelled the downward price slide. Technical support levels were penetrated on the way down, which in turn amplified the price declines.
Wheat futures at the CBOT, Kansas City and Minneapolis exchanges also experienced some price weakness, as these markets also could not escape the sell-off of commodities by speculators and commodity funds due to the uncertain global economic outlook.
Some underlying support was derived from concerns about the quality and yield of the spring wheat crop being produced in the northern-tier U.S. states and the absence of precipitation for the seeding of the U.S. winter wheat crop in more southerly states.
Losses in soft red wheat futures at the CBOT were restricted by ideas that most of the bearish price influences have now been absorbed and that values were in need of an upward correction.
It appears the impact on the grain and oilseed markets from outside macroeconomic forces is not going to go away anytime soon and will continue to provide for some turbulent price movements.
This past week s economic concerns were initiated by the potential of Greece defaulting on its debt. Those fears were achieved by the resentment the country displayed over the austerity measures demanded by the International Monetary Fund and European Central Bank.
Financial analysts feel the default by Greece will only unsettle the European banking system and lead to a credit freeze, disrupting world trade.
Comments by the U.S. Federal Reserve during the reporting period that the U.S. economic outlook is still bleak and that the euro-zone economy is on the brink of a recession also did not serve the commodity markets in a positive way.
With the global financial markets more than unsettled, the potential of further declines being suffered by the oilseed and grain sectors in Canada and the U.S. in the immediate future appears to be strong.
However, the one saving grace is that the world still needs to eat and with that concept comes good demand. At some point when prices, whether in canola, wheat or soybeans, drop to a low enough level, end-users will step in.
Countries such as China continue to look for pricing opportunities and other such end-users may step up to the plate and help turn this bearish market attitude back to the upside.
Dwayne Klassen and Phil Franz-Warkentin write for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.