Canola futures on the ICE Futures Canada trading platform experienced a setback in value during the week ended June 17. The significant downturn in CBOT (Chicago Board of Trade) soybean and soyoil futures helped to facilitate the losses in canola, with the steady liquidation of positions by speculators and, to some extent, commodity fund accounts adding to the bearish price atmosphere.
Concerns about lost acreage to canola this spring and the continued excessively wet growing conditions in eastern Saskatchewan and western Manitoba helped restrict the price declines in canola. There were ideas stemming from the Canadian Wheat Board’s projection during the week – forecasting an estimated 6.5 million acres of cropland will go unseeded this spring – 1.5 million to just over two million acres will consist of canola.
There was also justification to keep a weather premium in the canola market, which further helped limit price weakness. Market participants noted canola development is running well behind normal, which will translate into a late harvest. The late harvest will make it a little hard for grain companies to fulfil export commitments made for late-August/early-September delivery. The late development of the canola crop also leaves it extremely vulnerable to an early frost.
Western barley contracts on the ICE platform were ignored by the trade during the week. Cash bids for barley in Western Canada, however, continued to hold steady to firm.
CBOT soybean values suffered significant declines during the week ended June 17 in reaction to the favourable weather conditions that have increased seeded area to the crop in the U.S. and improved the yield outlook. There were already ideas that soybean yields will come in well above early expectations.
The absence of fresh demand from the export and domestic sectors contributed to the price weakness, with the cheap availability of the large South American soybean crop also contributing to the bearish price sentiment.
Corn futures at the CBOT posted sharp declines during the reporting period on the heels of profit-taking and chart-based speculative and commodity fund liquidation orders. The weather in the U.S. corn belt, which has also seen significant improvements and bolstered new-crop production prospects, contributed to the price declines.
Wheat futures at the CBOT, KCBT and MGE also suffered some significant price declines during the week ended June 17. Producers’ ability to make some progress in seeding the U.S. spring wheat crop in the northern-tier states helped fuel some of the weakness, as did the favourable weather for the harvest of the U.S. winter wheat crop. Continued reports from the winter wheat harvest suggest the yield potential is significantly better than anticipated.
Market participants are now looking ahead to the Statistics Canada acreage update survey due out June 23. Some individuals are looking to the report to get a better handle on what actually went into the ground this spring. Some, however, are already indicating the report will not provide a good insight on what was actually seeded, as producers were still in the midst of trying to get a crop into the ground, particularly in eastern Saskatchewan and western Manitoba.
The StatsCan survey was scheduled to be taken from May 24 to June 3.
The problem with the survey surrounds the timing. Producers, in answering the acreage question, may have been overly optimistic in their responses, thinking there was still plenty of time to seed, based on input from the trade.
Granted, producers took to aerial seeding and harrowing like heck in an effort to be eligible for crop insurance, but these market participants are now wondering just how successful this was, given the continued wet conditions.
Most individuals in the grain trade believe the acreage survey will show lower numbers than the April 26 results, which were for the end of March. However, the final numbers will still need to be lowered further.
Concerns over the state of the global economic recovery was again a dominant feature in the marketplace during the week, as speculators and commodity funds alike continued to bail out of positions in order to avoid any kind of financial loss. The continued debt crisis in Greece has unsettled a lot of global investors, with poor economic data coming out of the U.S. also unnerving a lot of individuals.
A lot of this bailing out has to do with the fact that in the last big push-up in commodity values, these participants lost significant value in their investments by not liquidating while they had a chance. As a result, those participants have started to ignore normal market influences, creating some extremely volatile price swings.
– Dwayne Klassen writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.