Extended Russian Export Ban May Open More Markets – for Sep. 9, 2010

Canola contracts traded on the ICE Futures Canada platform held within a rather narrow range during the week ended Sept. 2, bouncing around both sides of unchanged as any attempts to take values up were met with selling pressure.

The weather issues across Western Canada could definitely be seen warranting some added strength in canola, with heavy rains slowing harvest operations in the eastern Prairies during the past week and talk of frost starting to become a concern all across Western Canada.

However, “the show must go on,” and there should still be enough selling coming in off the combine to temper the nearby upside through the harvest period. Even with the delays, there remains plenty of talk in some circles about the fact that there is quite a lot of canola out there looking in pretty decent shape, if only the weather would co-operate.

Anecdotally, I’ve heard from a few producers over the past week surprised at just how much canola is out there, and how good it looks. However, those same producers also lamented the wet weather delaying harvest operations and expressed concerns about potential frost problems and other quality issues.

Not wanting to read too much into the technical charts, there is definitely a pattern brewing in the November canola contract which has tried, but failed, repeatedly over the past month to move above $470 per tonne. At this stage it looks like canola will need to see a serious weather event, or some sort of outside market activity, to break above that point – at least during the harvest period. Further out, the longer-term outlook looks firm, with both exporters and domestic crushers competing for smaller supplies this year.

Some analysts have come out with forecasts predicting canola values at $500 per tonne or more, if a weather event does come forward to alter the production expectations.

Bar ley futures were unt raded and unchanged during the week. On the cash side there were some conflicting market forces at work. Expectations for increased export demand were a supportive influence, as the Canadian Wheat Board is once again making some sales into the global market. However, ample supplies of other feedstocks, such as DDGS (dried distillers grains with solubles) from the U. S., and a lack of nearby demand from feedlots weighed on values.

In the U. S., corn and wheat both moved higher during the week, while soybeans were actually weaker for the most part.

OPPORTUNITIES

Wheat remains supported by the ongoing weather problems in Russia, especially as the country now says it will halt exports until after next year’s harvest. With Russia out of the picture for at least a year, that should create a lot of opportunities for other export nations. The U. S. has already been making sales to Egypt in some of the weekly data. Canadian export data is not as readily available for wheat, but there have also been some reports that Canada was also making some sales into markets where it might have lost out to Russia in the past.

The Russian drought situation has kept prices well supported for weeks, although the market may have turned a little stagnant after prices hit their highs in early August. Grain crops in many other parts of the world are also facing concerns, with Germany, Pakistan, Argentina, Canada and others all dealing with various issues.

With the global grain situation now looking a little tighter than it had been as recently as a month ago, it could bode well for Canadian grain exports going forward. However, the actual size and, more importantly, quality of our crop remains to be seen.

Corn futures in the U. S. hit their highest levels in 14 months during the week, with strong export demand, coupled with some concerns about U. S. yields, providing support.

While U. S. production uncertainty and strong global demand were also supportive for soybeans during the week, prices were generally softer as seasonal pressure started to come forward. That seasonal pressure could build, but talk of crop disease and yield reductions could also increase, which would keep soybeans choppy overall.

– Phil Franz-Warkentin writes for Resource News International (RNI), a Winnipeg company specializing in grain and commodity market reporting.

———

Forthree-times-dailymarket reportsfromResourceNews International,visitICEFutures Canadaupdates”at www.manitobacooperator.ca.

About the author

Columnist

Phil Franz-Warkentin - MarketsFarm

Phil Franz-Warkentin writes for MarketsFarm specializing in grain and commodity market reporting.

Phil Franz-Warkentin - MarketsFarm's recent articles

Comments

explore

Stories from our other publications