The Good: A positive response to the USDA report released at 11:00 this morning helped propel canola futures (January) to close up 1.2 per cent at C$989.40 per tonne. Canola is attempting to push through the resistance level at C$990 per tonne, which was established last week. The canola fundamentals remain positive as global vegetable oil stocks remain at multiyear lows. European rapeseed values also moved higher on the USDA report and closed up by over two per cent after trading lower through most of the session. The main driver was the soybean production estimate, which came in lower than market expectations (see The Bad).
The Bad: The soybean market recovered today as USDA surprised the market by reducing yields by 0.3 bushels per acre to pull production down to 4.424 billion bushels. The bad news is that despite the lower production, ending stocks were increased by 20 million bushels to 340 million bushels. The key driver was a 40 million bushel reduction in the export forecast this year. Increasing ending stocks is never good news, but the trade was expecting and increase to 360 million bushels and MarketsFarm even suggested a 400 million bushel carry-out was possible. This helped support soybean prices in trading today, but the market will likely realize that the report was more negative than positive in the coming days.
The Ugly: Tucked away in the coarse grain desk in the bowels of USDA, there is an analyst responsible for determining the forecast for the average farmgate oil price. The good news was that the analyst bumped the forecast up five cents per bushel to US$3.65 per bushel. Unfortunately it appears that USDA is unaware of the current tightness in the oats market, which has boosted futures to all time record highs. With futures prices still above US$7.00 per bushel and elevator bids in the US$5.00 per bushel range it is hard to imagine prices dropping to the point that the yearly average would clock in at the US$3.65 per bushel level. Perhaps they could move the cash oat price up 10 or 20 cents per bushel in the next report!