Canola futures on the ICE Futures Canada trading platform experienced a bit of a roller-coaster ride during the week ended March 5, as values pushed down one day and then moved up the next. On the week, canola values pushed upward thanks to steady domestic crusher demand, the surfacing of some fresh export demand and on the heels of the advances seen in the CBOT (Chicago Board of Trade) soybean complex.
Steady hedge selling by grain companies restricted the upward price move, as producers were reported to be willing sellers of both old-and new-crop canola supplies.
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Talk in the market was that producers were still able to get C$12-$12.50 per bushel for their old-crop canola, and they were not willing to pass those prices up. New-crop canola was being contracted by producers, given that values were in the $12-per-bushel range. A lot of the pricing was being done on the idea that producers didn’t want to pass up these values in case futures make another push to the downside.
Acreage and weather also played a role in the price movement seen in canola during the week. Some selling was inspired by comments made at the Canadian Wheat Board-sponsored GrainWorld conference in Winnipeg by a Bunge official who in his oilseed presentation predicted that Canada’s canola acreage could top out at over 20 million acres. That would definitely be a new record and would easily surpass the 16.818 million acres seeded in the spring of 2010.
However, the large acreage prediction ran into some resistance, especially with the excessively wet conditions in Western Canada and ideas that a lot of prime cropland will be covered by flood waters for quite some time this spring.
Some individuals in the oilseed sector suggested that with the weather and the high prices for alternative crops, canola area may actually drop below 2010 plantings.
Western barley contracts on the ICE Futures Canada platform failed to register any interest during the week, which left the commodity unchanged and untraded.
Chicago Board of Trade soybean futures were up on an overall basis, but values also suffered through losses one day and gains the next. Some support for soybeans had come from ideas that export demand for U.S. supplies would pick up given the rain-related harvest delays in Brazil’s soybean- growing areas and because of the port strike which has stopped the movement of soybeans from Argentina.
The growing crisis in the Middle East and North Africa helped to spark some pretty aggressive fund liquidation orders during the week, which helped to generate some of the downward price action. Adding to the bearish price sentiment in soybeans was a private estimate from Informa Economics, which indicated soybean output in both Argentina and Brazil will be much higher than first anticipated.
WAITING ON USDA
Informa forecast a Brazilian soybean crop at 71.4 million tonnes on March 4. That was up from its previous forecast of 69.3 million tonnes and well above the U.S. Department of Agriculture’s February forecast at 68.5 million. It pegged Argentine soybean production at 52 million tonnes, up three million from its previous forecast of 49 million. That would compare with USDA’s February projection of 49.5 million tonnes.
Pending USDA supply/usage revisions, due out March 10, and the potential for upward revisions to Brazil and Argentine soybean production could contribute to a setback at some point next week.
Corn values at the CBOT experienced small gains at best during the week, with concerns about tight ending stocks and strong ethanol demand generating some support. Profit-taking, as values have hit some new highs, also was quite prevalent and prevented any significant advances from being made.
Wheat futures at the CBOT were higher with the advances associated with renewed concerns about the poor weather conditions for the development of the U.S. winter wheat crop. The prime winter wheat areas in the U.S. were said to be extremely dry and were impacting crop growth. Additional support in U.S. wheat futures was derived from the flood forecasts and the already wet conditions in the northern spring wheat-producing regions of the U.S. There were concerns that the seeding of the U.S. spring wheat crop will be delayed significantly.
Concerns about world wheat production, meanwhile, were not expected to be eased until May or possibly June.
USDA’s 2011-12 U.S. soybean carry-over projection at 160 million bushels has little room for lower yields or acreage falling below USDA’s projection at 78 million acres.
There are also indications from private individuals of a significant possibility that the March 31 U.S. prospective plantings report could reveal planting intentions one million to two million acres below USDA’s projection.
Dwayne Klassen and Brent Harder write for Commodity News Service Canada, a
Winnipeg company specializing in grain and commodity market reporting.