Glacier FarmMedia COVID-19 & the Farm

Experts

 

The Good, Bad & Ugly

The Good, Bad & Ugly

The Good: Canola moved higher today with the May 2021 contract closing at 683.60 per tonne. This pushed the May to new contract highs and it is now the most traded contract in the canola series. Canola moved higher today and soybeans and soybean oil futures rallied by 1.5 per cent and 2.17 per cent, respectively. The increasing soybean oil values are continuing to support the nearby canola crush margins. The market seems to be content with the current canola demand and certainly is not wanting to ration canola use.

 

The Bad: The July canola contract moved higher on the day, which is closed the day at C$659.20 per tonne. The July contract is the last old crop contract in the series and is trading at a C$24.4 per tonne discount to the May contract.  From a relative value point of view, the July contract remains cheap when compared with soybean values. The spread between the July and soybean contracts are still hovering around the C$20 premium level, which is undervalued by about C$25 to C$30 per tonne level. July crush margins for canola are close to C$14.00 per tonne higher than the May position. Again, the futures values are not reflecting the tightness that will exist when we reach July. This should mean that the July contract will likely appreciate when we reach the end of March/early period.

The Ugly: Western Canada is not the only area in the world experiencing below normal temperatures. Most of Europe is experiencing well below normal temperatures with minimum temperatures ranging from -15C in London to -35 C in Moscow. The winter wheat crops in Ukraine are concerned about the cold temperatures, but Russian wheat area is warmer and not likely to experience winterkill. Of most concern is the winter rapeseed crop, which is vulnerable to the current temperatures. As they say, “misery loves company”!