The Good: What a week in the canola market! The canola futures market posted gains of C$32.40 on the week, with cash prices in deferred positions moving above the C$15 per bushel mark in the western Prairies and the upper C$14 per bushel level in the eastern Prairies. Despite the strong rally in canola futures, the premium to soybean futures remains at below historical values. Currently, the canola premium is close to C$20 to C$30 per tonne below the average spread. This means that canola remains undervalued when compared with soybeans.
The Bad: Spring wheat futures have had a good week, but the March contract remains at a significant discount to Chicago wheat futures. The spread between Minneapolis and Chicago March futures closed the week at -31 cents per bushel. The typical spread between the Minneapolis and Chicago contracts is around 55 to 65 cents per bushel. Spring wheat exports from Canada are 1.6 million tonnes ahead of last year’s pace. The reason for the strong performance of spring wheat exports can be explained by the relative value of spring wheat versus other wheat classes.
The Ugly: Don’t look now but crude oil is now trading at levels that we haven’t seen since the beginning of the pandemic. One of the primary reasons for the increase in prices is the weakening U.S. dollar. This means that fuel costs for the 2021 crop are likely to be “back to normal” by the time that seeding begins in the spring. Global supplies remain ample, so the market isn’t expected to move sharply higher, but the trend is certainly higher as the economy begins to recover.