The Good: The market seems to have shrugged off the “bearish’ USDA report and oilseeds have resumed their rally. May canola closed the day at a new record high of C$709.20 per tonne. At the same time, cash bids at or over C$17 per bushel for AMJ delivery began to pop up in central and northeastern Alberta. The strong canola cash canola prices are an indication that there still is demand for canola for this spring. Support for canola values continues to be the soybean oil market, which is trading at 46.61 U.S. cents in the May futures position. Strong soybean oil futures will help maintain crush margins, despite the increase in canola values.
The Bad: Spring wheat markets had a good rally today with May futures closing up 15.25 U.S. cents to settle at US$6.21 per bushel. The unfortunate reality today was that winter wheat contracts were up by nearly 21 cents per bushel. As a result, spring wheat remains the bargain basement wheat in North America. The July Minneapolis, Chicago wheat spread dropped back close to par, despite the recent rally in the spread. Logically, this makes no sense as we have stated before, the July Chicago contract is a new crop contract, while Minneapolis is decidedly an old crop contract. Of course this is encouraging HRS exports which were strong in the week ending on February 7th at 114,450 tonnes.
The Ugly: If the wheat market didn’t need some more bad news, the Australian forecaster ABARES increased wheat production to a record 33.3 million tonnes. USDA is likely to increase their wheat production forecast in the March report. This is likely to result in increased ending stocks and will partially undo the positive moves in the February report. As they say – “Easy come , easy go.”