The Good: The canola market managed to claw back a portion of the losses yesterday with the November contract closing the day up C$11 per tonne to settle at C$909.10 per tonne. Throughout the volatility over the past two days, cash bids remained mostly in the C$20 to C$22 per bushel range. Canola markets continue to evaluate the damage to the crop and are trying to establish the price that will ration demand in order to ensure adequate ending stocks next year at this time. Soybean oil futures were up by close to one per cent today which provided key support for the market.
The Bad: Spring wheat futures were down by nearly eight cents per bushel today, which caused the September contract to close at US$9.16 per bushel. At some point the rally in spring wheat will need to pause and consolidate. The Kansas City futures today rallied by eight to nine cents per bushel, which caused the spread between the two markets to narrow by 16 cents per bushel. News that millers are scouring Kansas for higher protein (11.0 per cent plus) in order to minimize HRS grind is certainly supportive of HRW demand. With spring wheat harvest a couple of weeks away, quality will be the next concern for the spring wheat market. MarketsFarm expects large volatility in market reaction to the harvest quality and quantity. That volatility will begin next week, when the spring wheat tour begins in North Dakota.
The Ugly: The U.S. durum market is gaining momentum as exporters and millers come to grips with the significant drop in production. Cash prices have moved US$2.00 to US$4.00 per bushel since last week, which has resulted in a large spread to cash prices in Canada. The market in Canada remains undefined as elevator bids are not attracting any interest, although anecdotal reports put the bids much higher than posted values. It’s a lot like going into a used car lot and the salesman asks you how much you would give him for the 2005 pickup. When you say 100 bucks they are insulted and walk away. If you are serious in doing a deal – give me a real price! The reason durum values are higher is the crop has gone downhill quickly in the past two weeks. The graph below shows the condition of the crop in Montana – 16 per cent of the durum is in good to excellent condition. Durum bids need to move into the teens in Western Canada.