Glacier FarmMedia COVID-19 & the Farm



The Good, Bad & Ugly

The Good, Bad & Ugly

The Good: It was an ugly day in the markets and canola was no exception. Nearby March canola closed down C$29.90 to settle at C$984.80 per tonne. Rain forecasts for southern Brazil and Argentina pressured the oilseed market today, along with some macro based on buying equities and selling assets that were an inflation hedge such as crude oil, metals and agricultural commodities. There was some good news in the weekly export numbers for canola. A total of 122,300 tonnes of canola were exported in the week ending on January 9th. This pushed total canola exports to 3.066 million tonnes for the crop year to date. This puts canola exports on pace to exceed 6.0 million tonnes this year, which is an outcome that is impossible with current ending stocks projections. Canola stocks in Vancouver on January 9th were 130,600 tonnes, which indicates that more exports are on the way. Meanwhile we are lowering futures values to decrease export demand! That doesn’t make much sense.

The Bad: Wheat markets were also lower today as the sell off in spring and winter wheats continue. The USDA indicated that HRW sown area increased a paltry one per cent from last year, so yields will need to increase in order to make up for the 88 million bushel drop in HRW stocks this year. The drought monitor continued to increase drought areas in the Southern Plains, with most of the growing areas in Oklahoma and the Texas Panhandle now in extreme drought. That makes the 18 cent per bushel loss in the nearby Kansas City contract a little puzzling. Exceptional drought also continues in northwestern North Dakota and the northern half of Montana. Someone should tell the market that these areas also produce spring wheat, because the Minneapolis March futures dropped 25 cents per bushel. Very puzzling indeed as that price move is certainly not buying the additional acreage needed to produce the additional 172 million bushels needed to make up for the drop in spring wheat stocks this year!

The Ugly: The latest decline in the agricultural commodity futures was in the oat March contract, which dropped 3.6 per cent during the session. The nearby March oat contract is now trading at levels similar to the middle of October. The new crop harvest of oats in the Northern Plains and Canada is seven months away and the market is reacting like harvest is just around the corner. The saying goes “oats knows”, but I think that oats were caught up in general macro selling pressure, rather than any change in the fundamentals.