The Good: The canola markets in Europe and Canada continue to play leap frog with each other, with the nearby ICE March canola contract closing at a new record high (closing) of C$1,023 per tonne. Not to be outdone, the European rapeseed February contract closed their trading session at a new record of 806.50 Euros per tonne. Not to be left out, soybean oil futures moved up by 1.6 to 1.9 per cent to close just under the 60 U.S. cents per pound level. The main driver for the oilseed markets is the drought in southern South America (see The Bad).
The Bad: The support for the oilseed markets from the dry conditions in southern Brazil and Argentina continued today based on the nearby forecast for the next week. Minimal rainfall and above normal temperatures are expected over the next seven days. The longer term forecasts for Argentina and southern Brazil are pointing to improving chances for rainfall in the week of January 16th as a system pushes into central Argentina, Uruguay and southern Brazil. This forecast helped push the oilseed markets higher today.
The Ugly: The spring wheat March contract dropped 22.25 U.S. cents today with the contract closing at the lowest level since October 15th. The contract settled at US$9.48 per bushel with the momentum definitely towards the downside. One thing to consider is that the nearby corn contract in the middle of October was trading close to US$5.25 per bushel, which was about 80 U.S. cents per bushel below the current corn price. Slow U.S. exports are often cited as a sign that spring wheat futures are overvalued, but exports over the Christmas week are usually slow. Although futures are down, spring wheat basis remains very strong in both the U.S. and Canada as wheat supplies are tight.