CNS Canola futures on the ICE Canada platform suffered some significant losses during the week ended November 2 with the declines associated with market participants bailing out of long positions.
The taking of profits accounted for a portion of this selling, but the inability of technical support to hold in a number of contracts, prompted speculative and commodity funds to unload canola positions.
The downward price action in the futures market also reflected sentiment that canola is overpriced in comparison to the other oilseeds and needed to see a correction. The downward push in CBOT soybean and soyoil values during the reporting period certainly didn’t do canola any favours. Continued talk of record area being planted to soybeans in Brazil and Argentina also added to the bearish sentiment hanging over the oilseed sector.
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The decline in canola was slowed by commercials, who continue to try to secure supply in order to meet export and domestic commitments. There appeared to be a pickup in farmer selling this week, with that interest picking up substantially especially as canola futures lost value.
There certainly was some panic selling in the market on Friday (November 2). Now was the sell-off in canola a sign of more to come? The key here is that it is not December and that the soybean crop in South America has not developed to its full potential yet.
If that was the case, then canola futures would definitely be looking to see some further declines. Something else to keep in mind is that export demand for U.S. soybeans also remains strong, which will keep nearby stocks of the commodity tight.
It is also important to remember that canola stocks in Canada are also much smaller than had been originally forecast and that commercials will be looking to attract deliveries through to the new year. There was non-existent activity seen in the ICE Canada milling wheat, durum and barley contracts during the week. There have been industry discussions held on the inactivity in these futures and officials with ICE Canada remain optimistic that interest in trading these contracts will grow with time.
There has been scuttlebutt circulating in the trade over the past week or so, that the U.S. ICE platform is looking to purchase the Minneapolis Grain Exchange. If this does occur, it would certainly raise some questions about the future of the milling wheat and durum contracts on the ICE Canada platform remaining intact, given that Canadian grain companies remain fairly happy hedging risk on the Minneapolis market.
Soybean futures at the CBOT experienced declines during the reporting period, with most of the downward price push associated with the late-week upswing in the value of the U.S. dollar. The taking of profits also filtered into the price weakness. The unloading of risk in the outside market also added to the bearish price sentiment.
However, based on comments from market players, the losses in soybeans were artificial and were not based on any fundamental factors. They pointed out that demand for U.S. soybeans from the export sector continues to be strong, and given the tight supply situation, some further price rationing will need to occur.
The domestic crush pace of soybeans in the U.S. also continues at a brisk pace, further limiting those resources. The USDA will also update its supply-demand balance sheets on November 9, which should help to determine just how tight soybean stocks in the U.S. really are.
Corn futures on the CBOT posted some fractional advances during the week with support stemming from the need to correct values from oversold levels. Some chart-based speculative and commodity fund buying also helped to underpin values. Concern about tight supplies also provided some underlying support.
The upside in corn, however, was restricted by the continued absence of demand for the commodity from the export and domestic sectors. The late-week climb in the value of the U.S. dollar also did not help corn futures.
The price trend in wheat futures on the CBOT, MGEX and KCBT was generally to the plus side of the market, but the advances were definitely hard earned. Some of the strength continued to come from the hope that export demand for U.S. wheat will pick up, especially with production in some of the other major wheat-producing nations still coming up short of expectations.
Talk of dryness in the winter wheat-producing areas of the U.S. also influenced some price firmness. Super-storm Sandy certainly dominated the market during the week but failed to have any major impact on the U.S. grain and oilseed futures. There were concerns that with the soybean harvest in North Carolina and Ohio already delayed due to extremely wet conditions, that the moisture associated with the storm would damage those crops.
However, a market participant was quick to point out that a loss of 50 million bushels of soybeans due to the storm, was actually quite small in the big picture. The elections in the U.S. also provided some talk at coffee shops in the country.
The big debate appears to be over who would be better for the U.S. agricultural sector. There are ideas that if President Barack Obama and his Democratic party are elected it would apparently be bearish for CBOT grain and soybean futures. Meanwhile, a win by Mitt Romney, and his Republican group is believed to be bullish for the futures market. Whether or not either candidate would help the U.S. futures market is speculation at best, but U.S. farmers are leaning towards Romney and his Republicans. Apparently, when Ronald Reagan was voted in as president of the U.S., his strong farm policies greatly benefited the agricultural sector. In discussions with farmers and farm groups in Canada, neither candidate and their farm policies would be of benefit to agriculture on the Canadian Prairies.
