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ICE Futures Canada canola contracts started to edge to the upside of their long established trading ranges during the week ended April 30. However, expectations for record Canadian canola plantings and the generally favourable weather conditions across Western Canada tempered the advances.
With most of the Prairies seeing some much-needed precipitation during the week, even though it came as snow in Alberta, the chances of a sizable spring rally are seeming less and less likely. Canola is only starting to go in the ground in many areas, but the general consensus remains that actual seeded acres across Canada will end up well above the already-record 16.9 million recently predicted by Statistics Canada.
Firm demand from both the domestic crushers and the export market should limit any downside in canola, but those buyers won’t pay more than they need to and it will likely take a supply problem somewhere in the world to give prices any sort of noticeable boost.
Talk of possible production problems with the rapeseed crops in China, Europe, and Ukraine was starting to circulate the markets. Dryness in some of Chinese rapeseed growing areas was reportedly cutting into yields, while Ukraine was facing winterkill issues. In Europe expectations for average yields, despite an increase in planted area, will likely lead to a production shortfall. While concerns over GMOs may limit how much Canadian canola makes its way to Europe to fill that production shortfall, the overall global supply/ demand framework appears to be shaping up in Canada’s favour, even if we do have a record crop of our own.
The Canadian dollar jumped around during the week, but ended up weaker relative to the U. S. currency overall. Currency analysts seem to be of the opinion that the Canadian dollar will continue to chop around parity, with the longer-term outlook still calling for further strength.
Western barley futures were untraded and unchanged once again during the week. The cash prices were also holding steady, with ample competing feed grain supplies keeping values well contained.
In Chicago, soybean futures moved lower, with the firm U. S. dollar, quick U. S. planting pace, favourable weather conditions and large South American crop all weighing on values. Much like canola, it will take some sort of a weather scare or unexpected jump in demand to swing the soybean market back higher.
CHINA BUYS CORN
Corn, meanwhile, did get an unexpected shot in the arm during the week and managed to bounce higher after initially touching some of its lowest levels in months.
The quick planting pace for what will likely be a new record-large U. S. corn crop understandably put some downward pressure on corn prices. However, news that perennial wildcard China purchased two large cargoes of U. S. corn shook up the market and caused values to rally higher. China hadn’t bought any sizable shipments of U. S. corn since 2001 and the unexpected purchase immediately had analysts speculating about how much more U. S. corn would find its way to China.
Manitoba is a relatively small player in the international soybean and corn markets, but both crops are expected to see an increase in acres in the province this year. Soybeans in particular could see record acres for the province this year, as demand has remained firm for the commodity through the winter and conditions are shaping up nicely for getting the crop in the ground.
U. S. wheat futures largely played the role of follower during the week, dropping lower and then slowly working to regain ground on the back of the firmer corn market. Short-covering was supportive for wheat, but prices were down overall for the week, as crop conditions remain generally favourable for U. S. winter wheat.
While most Canadian farmers are only in the early stages of the 2010 growing season, the winter wheat harvest was getting underway in southern Texas during the week. The harvest was actually starting later than normal due to the fact that planting had been delayed last fall.
In Canada and much of the U. S. there is still a long season ahead, which will leave the door open for many ups and downs in the commodity markets. Provided the weather co-operates, it looks like the crops will start out facing reasonably good growing conditions this year, which is a good sign for yields but should limit the upside on prices.
Aside from the weather and crop progress, all of the commodity markets will continue to take some direction from the overarching international economic signals. The debt crisis in Greece has been the big catalyst recently, with the ebbing and flowing of the economic concerns there causing the big speculative traders to move in and out of the commodity markets. Those global money flows have the potential to move commodity prices sharply one way or the other, although it will likely take fundamental news to sustain any move.
– Phil Franz-Warkentin and Dwayne Klassen write for Resource News International (RNI), a
Winnipeg company specializing in grain and commodity market reporting.