Glacier FarmMedia COVID-19 & the Farm

 

The Good, Bad & Ugly

The Good, Bad & Ugly

The Good: Canola bucked the negative tone tone in the markets today by finishing unchanged to slightly higher in trading today. The canola market has moved through the 40 day moving average and held the gains so far this week. The impressive part of the price action today is that soybean markets had a meltdown with nearby futures off 12 to 13 cents per bushel. Canola on the other hand was down 60 cents per tonne to up 20 cents per tonne in the July and November contracts. The next technical level for the July contract is C$472 to C$473 per tonne level which the current rally is trying to breach. Next stop is C$475 per tonne if that can be achieved. The November contract has closed over the 40 day moving average and will now try to test the C$479 to C$480 resistance level. Support from soybeans and soybean oil will likely be needed to push the market through those levels. The Nomveber contract is shown below after todays trading action.

The Bad: The weather in North Africa during May has been poor for the filling of the wheat and durum crops in the region. Last week temperatures were close to 5C above normal, which pushed the daily maximum temperatures to the upper 30s and low 40s. The crops in the region are in the late filling stage and harvest will begin over the next two to three weeks. The dry, hot finish will likely push yields below average in both Algeria and Tunisia. Morocco has already dropped their crop estimates significantly.

The Ugly: The prospects for another trade war between China and the U.S. increased as the administration ha increased its rhetoric blaming China for the coronavirus. The difference this time around is that the U.S. economy is very weak and the Chinese economy is recovering. I would expect that the pushback from China will be very strong this time around. This is certainly ugly news for the commodity markets should the words turn to actions in the coming months.