The Good: The situation in Australia continues to worsen as the main growing areas as most of the main growing areas in northern New South Wales and Queensland have received between 50 mm and 200 mm since the beginning of the month. The wet harvest is causing a large portion of the wheat crop to be downgraded due to low falling numbers. The Australian handling system is experiencing significant difficulties in meeting falling number specifications for exports from the northern ports. More rain is forecast for the central and southern areas of eastern Australian over the next 10 days. This is good news for wheat prices as the supply of Australian wheat may be large, but the amount of millable Australian wheat is significantly lower than last year.
The Bad: The nearby January canola contract dropped C$12.40 per tonne today, but still closed the session above C$1,000 at C$1,012.90 per tonne. Canola futures were weighed down by lower soybean oil and European rapeseed values. The soybean oil contract was pressured by the latest NOPA report, which indicated that soybean oil stocks were 1.835 billion pounds, which is by far the largest in the past five years. The soybean oil yield of 11.89 pounds per bushel in the 2021 crop is the highest oil yield since 2014. This caused the nearby soybean oil futures to drop by 1.3 per cent today. Exports need to increase and soybean oil is certainly pricing its way into vegetable oil markets.
The Ugly: The December spring wheat contract dropped 23.5 cents per bushel today as the contract takes a back seat to the March. Expect a large amount of volatility in the December contract as it looks forward to option expiry on November 26th. The drop in the nearby futures pushed December wheat futures to a discount to the March position of 3.75 cents per bushel. Although most traders have moved their positions into the March contract, there still is enough open interest to make the next 10 days of trading very volatile. The funds remain very long Minneapolis wheat with a net position of 16,424 contracts on November 9th.