The Good: Ho hum, another day, another contract high for the canola market. The January futures contract closed at C$563.60 per tonne, which continues the rally in the canola market. Soybean futures continued to rally today with nearby futures rallying by 14 to 16 cents per bushel. Soybean meal and oil values continue to increase in lock step which is helping support the oilseed complex. The surest sign of a demand pull market is that the seed and products rally simultaneously.
The Bad: The bad news about the canola rally is that the relative value of canola versus soybeans continues to drop. This shows that canola continues to be undervalued compared with soybeans. The goods news is that this will eventually correct and canola should move back to the typical premium of C$40 to C$45 per tonne. The premium for canola during the month during November has moved from C$25.00 to less than C$1.00 per tonne today.
The Ugly: There is no question about it, but the drop in spring wheat futures today pushed values close to breeching technical support levels. The wheat market has been treading water over the past month. Spread trading between corn and wheat (long corn, short wheat) may be behind the most recent setback in the wheat market. Spring wheat remains the bargain basement wheat of the classes produced in North America.