The Good: Yes, May canola jumped another C$22.60 per tonne to hit C$749 per tonne at the close. However, the good news story today is the forecast for the first week in March, which is looking like it will start out like a lamb rather than being a lion. Above normal temperatures are expected in the first week of March which should melt the existing snowcover in the southern and eastern growing areas of the Prairies. The lack of snowcover in the eastern Prairies will also increase the temperature as most years have significant snowcover still present in early March.
The Bad: We all knew that the rally in wheat would last as most one day. Wheat seems to like to draw out the drama with one move up and another move lower. We are trapped in a trading range in the Minneapolis contract, with US$6.30 peer bushels on the low end and US$6.50 per bushel on the high side. Spring wheat is looking for a breakout move, but the good news is that cash markets have responded by moving higher over the past month. Alberta bids are mostly in the C$8.25 to C$8.50 per bushel range and the eastern Prairies nearing the C$8.00 per bushel mark in the deferred contracts.
The Ugly: Nearby canola is overvalued, but that doesn’t extend to the November new crop contract. The November contract moved sharply higher today and closed the day at C$606 per tonne. You would think that would make the new crop contract overvalued, but canola is still undervalued by about C$10 to C$15 per tonne from the long term average. It is interesting that cash bids started to approach the C$14 per bushel level in Alberta for new crop canola. Keep an eye on the new crop contract as it should be dragged higher by the strong old crop contracts.