The Good: July canola futures rallied during turnaround Tuesday to close at C$ 742.20 per tonne. Soybean futures were up six to seven cents per bushel, while soybean oil rallied by over three per cent which provided support for the canola market. The volatile trading is just going to accelerate as funds move their positions from the casino May contract to July. The interesting feature of the canola market is that there is little in the way of weather risk premium for new crop positions. The July – November canola spread continues to trade in a C$100 to C135 per tonne range and hasn’t moved out of the channel since mid February. One would think that a weather premium needs to be pushed into new crop positions over the next few weeks as one big rain/snow event in the eastern Prairies doesn’t solve the drought issues.
The Bad: So much for a weather premium for spring wheat as the spread between Minnesapolis and Kansas City has narrowed over the past two days. The spread has only dropped by four cents per bushel since peaking out at 66 cents per bushel on Friday. Spring wheat did manage to close the day up five to six cents per bushel on the day, which is a good response to yesterday’s losses. Wheat futures in general lost ground to the Chicago corn contracts which were up 10 to 11 cents per bushel. This is the real reason that wheat futures rallied today. MarketsFarm believes that corn will play a large role in determining wheat prices over the next few months.
The Ugly: To put the Northern Plains drought into perspective, the past six months across most of North Dakota has been the driest since records in this data series began in 1895. In others words this has been the driest winter periods in 126 years, This is consistent with the winter precipitation in southern Manitoba, which is the driest or second driest on record. The precipitation from the current system, although beneficial will not likely change the six month precipitation level rankings when April is finished.