The Good: Canola was the clear winner today today as the nearby March contract moved up C$21.10 per tonne to C$714.30 per tonne. This is a new record level for nearby canola, but the March contract is increasingly looking like a casino with the main objective to give short position holders (including commercials) maximum pain. Pricing for the real world has moved to the May and July contracts. The chart below shows the spread between the March and the July contract. The spread has just moved to C$67 per tonne in favour of the March contract. This is a very strong signal to that when the shorts are covered, then the March futures will likely take a tumble. This is not necessarily bearish for the canola market in the long term, but will add to the short term volatility.
The Bad: Wheat markets behaved badly today in the face of slightly higher corn prices. The nearby spring wheat contract closed the day at US$6.33 bushel. Guess which wheat contract on the board for 2021 is the cheapest across all three futures markets. You guessed it – the March 2021 Minneapolis contract. Spring wheat futures actually dropped the least of the three markets today, but inter-market spreads are still out of whack. This means that spring wheat is likely to see better days in the future.
The Ugly: It’s not all roses with the corn market as the market is becoming concerned about demand rationing in the livestock and ethanol sectors. The latest number from the EIA showed a slight drop in production with output dropping to 933,000 barrels per day. The output in 2020 averaged 904,000 barrels per day, which is means that ethanol use will certainly be higher than last year. The high prices for corn may cause further deterioration of ethanol production for the remainder of the crop year.