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Oilseed values gaining on talk of U.S. biofuel rules

Speculation on Trump’s next move supports crush margins

ICE Futures Canada canola contracts posted solid gains during the week ended March 3, as a flurry of speculation about rumoured changes to U.S. biofuel regulation injected strength into oilseed prices.

Canola’s May contract rose from a closing price of $515.30 per tonne on Feb. 24 to settle at a closing price of $532.60 on March 3.

The market was partially lifted by surging vegetable oil prices and strength in U.S. soybeans.

Much of the increase was traced to ideas that the Trump administration will offer incentives for ethanol and biodiesel creation in the U.S. while slashing foreign imports.

As of March 3 however, there were few, if any, concrete details about what measures would take place or how they would affect Canadian canola exports.

Both soybeans and soyoil on the Chicago Board of Trade reaped large gains in the wake of Trump’s address to the U.S. Congress and the speculation that went with it. The “Buy American and Use American” mantra seemed to bolster investor confidence in U.S. agriculture.

It also raised crush margins on the Prairies, something that hadn’t happened for a while. Crush margins had been down nearly $50 per tonne in late February before staging a rally behind soyoil.

Steady global demand for oilseeds propped up prices, especially after muddy roads in Brazil prevented many shipments of soybeans from getting to port.

Spring buying was also in the air as traders debated how much canola was left in Prairie fields and what its quality would be.

Exports of canola remained steady while farmers were quick to pounce on rallies while holding supplies back during the downturn in price.

Muddy roads

CBOT soybeans gained roughly 13 cents on the week. Much of the strength came from the rumours on U.S. biofuel regulations, but weather issues were also at play. Farmers in Brazil have had difficulty getting soybeans to port due to muddy roads which delayed exports significantly.

May corn futures gained 10 cents on the week, also enjoying speculation over what U.S. biofuel regulatory changes may mean for ethanol production. Weekly U.S. ethanol production reached one million barrels or higher for the 18th week in a row. Corn acreage in the U.S. is also expected to suffer slightly as farmers swap out acres in favour of soybeans.

Wheat futures rose as much as 5-1/2 cents, taking strength from spillover gains in corn and soybeans. CBOT wheat was also buoyed by weakness in the U.S. dollar. Exports were steady while ideas persist that winter wheat in some regions of the U.S. southern Plains and Midwest may emerge too early and become vulnerable to frost.

About the author

Columnist

Dave Sims

Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Dave has a deep background in the radio industry and is a graduate of the University of Winnipeg. He lives in Winnipeg with his wife and two beautiful children. His hobbies include reading, podcasting and following the Atlanta Braves.

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