Canola futures on the ICE Futures Canada trading platform posted small advances during the week ended Feb. 22. The gains would have been significantly higher had it not been for some late-week taking of profits by a variety of market participants.
Some of the strength was related to the downward swing in the value of the Canadian dollar, which as of Friday had weakened to below US98 cents and was sitting at 7-1/2-month lows. The loonie’s drop certainly encouraged some additional domestic processor demand and may have also encouraged some fresh export sales, although no new business had been confirmed as of Friday.
The strength displayed by CBOT (Chicago Board of Trade) soybean futures had also encouraged some of the gains in canola, with ongoing concerns about tight old-crop canola further underpinning values.
The upward price action in canola was also capped by overhead technical resistance which sits in the May future in the $640- to $645-per-tonne range. The contract managed to hit as high as $649.90 but was unable to hold that level before retreating back down to the $621.40 area on Friday.
The upside in the global oilseed market, including canola, also was restricted by the arrival of beneficial precipitation in the soybean-growing areas of Argentina during the week.
Activity in the milling wheat, durum and barley markets on the ICE Canada platform continued to be non-existent. Only some minor arbitraging of durum occurred during the reporting period.
Continued worries over tight old-crop supplies provided some of the upward momentum that took CBOT soybean futures to higher ground during the reporting period. Steady demand from the export sector, with China said to be concerned about moving soybeans from Brazil given growing labour unrest at Brazilian ports, also lent support.
The upside in the deferred soybean contracts was definitely limited by comments made at the U.S. Department of Agriculture’s outlook forum, held in Arlington, Virginia during the week.
USDA chief economist Joseph Glauber, who reported his agency’s findings, forecast U.S. soybean production would increase by 13 per cent from the year-ago level to 3.4 billion bushels. The estimate was based on normal weather conditions returning to the U.S. soybean belt, compared to the drought seen hurting last year’s output. USDA pegged soybean area in the U.S. at 77.5 million acres, which represents a 0.4 per cent jump from the acreage seen a year ago.
Soybean prices, meanwhile, were forecast by Glauber and his agency to average out at US$10.50 a bushel, which would be down 27 per cent from the previous season.
CBOT corn futures were generally lower, with continued poor demand and the prospects of increased acreage linked to the bearish price sentiment. The continued rise of the U.S. dollar discouraged demand for U.S. corn from the export market, with steady decline in demand from the ethanol sector also adding to the weakness.
USDA also didn’t do corn any favours with its predictions at the outlook forum. U.S. corn output in the upcoming season was seen rising 35 per cent from last year’s level to 14.5 billion bushels. U.S. farmers were expected to plant 96.5 million acres of corn, based on estimates from Glauber. If this area prediction holds, that would actually be a 0.7 per cent drop from the 75-year high planted last season.
Glauber also projected that with more traditional production levels, corn values would average out in the US$4.80-a-bushel range, once the season starts in September.
Wheat futures snowed in
The price trend in wheat futures on the CBOT, Minneapolis and Kansas City exchanges continued to be to the downside. Some of the price decline was influenced by the arrival of much-needed snowfall in the main U.S. winter wheat-growing areas. The strong U.S. dollar also continued to scare off export demand, with the high values also causing the feed sector to back off to some degree.
The improved moisture situation for Argentina’s wheat crop also helped to generate some price weakness in the U.S. wheat market.
Glauber forecast all-wheat area in the U.S. would climb to 56 million acres in the spring, which would be an increase of 0.5 per cent from last year’s level. However, he felt leftover dry conditions would result in U.S. wheat production falling seven per cent to around the 2.1-billion-bushel level.
CBOT oat futures posted some advances, with supply concerns also helping to fuel the gains. The advances in CBOT oats had a direct bearing on some of the strength seen in the cash oat sector in Western Canada.
Reports surfaced during the week that cash bids for oats, particularly in southern Manitoba, managed to move above the $4-a-bushel level. No word was available on how long those kind of values would be paid out, but U.S. demand was linked to some of those gains.