The Good: Canola markets continued to push higher as higher soybean and soybean oil futures propelled the May contract to new market highs. This should be good news across the board, but see the Ugly section for the latest in the news on potential Chinese trade issues. The moves higher this week have been accompanied by higher cash prices, with some C$18+ bids showing up in Alberta today. The warning note is that canola values are now considerably higher than soybeans in all positions except for the new crop November, where canola is still relatively undervalued.
The Bad: The main concern for the canola markets is that the recent rally has pushed futures values to levels that are dramatically higher than the long term average of C$50 to C$55 per tonne. The graph below shows it all as canola hits new contract highs, the spread to soybean values are now double the long term trading range. This is certainly a warning sign that canola futures are becoming overvalued.
The Ugly: Parliament has approved a motion to formally recognize that China is committing genocide against its Muslim minorities. As well Parliament approved a motion to urge the IOC to move the 2022 Olympics. This is undoubtedly a game changer for the Canadian grain and oilseed markets as there will undoubtedly be a response from the Chinese government. You only have to look at the Australians for an example of how export goods into China may be treated. It may take a few days to figure out the extent of the retaliation by the Chinese, but there is no doubt that Canadian agriculture exports will be in the cross-hairs.