The Good: Canola markets finished on a strong note today as the market becomes increasingly concerned about dry conditions in South America. This pushed the contract up C$6.20 per tonne to C$593.00 per tonne. This left the January canola contract at essentially the same level as last week at this time. The market is rapidly rolling their positions from the January to the March contract, which may lead to some interesting moves in the coming week. The canola futures markets are still inverted to new crop positions, but cash markets are still showing a carry until July. Canola exports last week totalled 254,500 tonnes last week, continuing the strong export pace.As long as exports continue to roll, canola futures will need to move higher.
The Bad: Spring wheat markets should have been in the good column today as nearby contracts moved up 7.5 cents per bushel during the trading session. The problem is that winter wheat futures rallied by 17 to 18 cents per bushel. This puts nearby spring wheat futures at a discount to Kansas City futures in the March and May positions. The move in the Kansas City futures contract extended into the July contract, which drove spring wheat futures to within a cent per bushel of the HRW futures. This makes no sense as the July contract for spring wheat is still an old crop position. The futures markets needs to ask the question “How many acres are Prairie and Northern Plains farmers going to plant if canola is over C$12 per bushel and soybeans are above US$11 per bushel?” This spread needs to move back into line before too planting decisions are made on spring wheat area.
The Ugly: The markets decided that they didn’t want to go into the weekend without some soybean coverage as South American weather remains the focus. The weather forecast is ugly with below normal precipitation expected in Argentina and the northern growing areas of Brazil next week. Above normal rainfall needs to arrive soon to precent yield losses in the South American crop.