The Good: The canola futures takes the award for the best performing futures move this year with current prices nearly double the previous high. set in 2008. The dynamics in the canola market are straight forward. The largest exporter, Canada, had a crop of 12.6 million tonnes which has limited the availability of exports. This pushed rapeseed oil prices to all time highs which has pulled seed values higher. Given that the overall vegetable oil situation is tight, the loss of rapeseed oil production has made the complex even tighter. The market is expected a dramatic recovery in canola production this year, but that assumes above normal rainfall this growing season.
The Bad: Spring wheat futures have moved to 10 year highs this year, but the market is indicating that that may be as high as this market will go. The direction of spring wheat depends entirely on the prospects for the U.S., Russian and European 2022 wheat crops. The winter wheat crop in the U.S. is under some stress, but the critical part of the growing season doesn’t begin for at least three months. Spring wheat markets are strong, but seasonal pressures will begin to influence the wheat contract. By the way, a large portion of the spring wheat area in North America are still extremely dry!
The Ugly: The input costs continue to get more expensive with crude oil moving back above the US$75 per barrel mark. The good news is that it is experiencing a large amount of resistance at the US$80 per barrel level. There is a silver lining in the crude oil price in that the all time highs were set back in 2008 when prices moved up above the US$140 per barrel level. The runner up for the year in the ugly category are fertilizer prices. Although they (MAP, DAP and Urea) have dropped slightly from highs set in November, values remain much higher than even just six months ago.