Grain markets this morning are mostly in the green again, although canola prices are being weighed down by the Canadian Loonie climbing back above 80 cents USD.
“You can always think that we’re old and not innovative, but there is no company that can limp on for 139 years without being creative and having the genes to change.” – Hans Vestberg (Swedish businessman & former CEO of Ericsson)
Grain markets this morning are mostly in the green again, although canola prices are being weighed down by the Canadian Loonie climbing back above 80 cents USD this morning.
As Garrett recapped yesterday’s action in Grain Markets Today, we saw wheat prices pull back a bit while corn prices and soybean prices found the green for the third straight day this week! Wheat was mainly influenced by some wetter weather in the forecast for the US Southern Plains, the main area of bullish focus for wheat prices right now.
The EU wheat crop has some decent snow cover, albeit rains in France have been a bit concerning. Acreage estimates there were recently cut by the French Ag Ministry to 12.25 million acres.
American crop insurance revenue prices are slightly below where they were in 2017, but if we can see the rally from earlier this week return, there’s a good chance we could be similar to last year’s prices. From a market standpoint, prices for new crop corn prices and soybean prices are basically the same as what they were at this time a year ago.
What Else Could Move Soybean Prices?
Today we’ll get U.S. export sales data from last week but also the January US soybean crush report from NOPA. Pre-report guesstimates are for 165.51 million bushels crushed last month, which would be about a 3% jump year-over-year.
The CEO of Bunge thinks that there’s potentially more room for soymeal prices to increase, which would support soybean prices as well. This is after the soymeal prices closed at a 19-month high on Wednesday!
Since soymeal is a feedstuff, this could encourage some slightly higher prices for other feed ingredients (i.e. DDGs or corn). However, we’re extremely cognizant of downside risk, given the amount of feedstuffs available in the world and how price sensitive markets like China can be.
Case in point, the idea that China could slow its imports of US soybeans continues to weigh on soybean prices. Earlier this morning, Garrett took a look at some historical comparisons to agricultural trade disputes between China and the US and the impact that less US soybeans could have on Chinese consumers.
Canola Prices Trending Higher?
In the last few days of trading, we’ve seen canola prices track a bit higher, playing follow the leader with soybeans a bit. I also noted in Monday’s Breakfast Brief how lower-than-expected palm oil stocks in Malaysia were supporting canola prices.
It’s Indonesia that is going to be the more bearish player though it seems when it comes to palm oil. The most recent update from the USDA’s attaché in Jakarta suggests that the palm oil crop in Indonesia will come in at a record 38.5 million tonnes. That’s a 7% – or 2.5 million tonne – jump, year-over-year.
As a lot of palm oil is repurposed for biodiesel means, the underlying strength of the oil prices will help keep palm oil and other vegetable oil prices (including canola prices) relatively stable.
That being said, we’ve seen soymeal and soybean prices increasing on the Argentinian weather premium, but soy oil has been pretty reluctant to join the party. And since canola prices are often more aligned with soy oil that soybeans, it’s why you haven’t seen a proportionate rally for canola like we’ve seen in soybeans.
The fact remains that the world has a very healthy supply of vegetable oils, and the substitution effects on canola are very real, a factor we cover in detail in GrainCents.
Switching gears a bit, France’s farm ministry slashed its rapeseed acreage expectations by 105,000 acres to 3.70 million. Despite the cut, this is still nearly 232,000 acres more than what was planted last year, about a 7% increase year-over-year. Thus, the output is still expected to be higher than last year, just as rapeseed prices on the commodity futures boards in Paris hit a 17-month low.
Can canola prices only go up from here?
We’ve been looking at different angles of this question for our canola GrainCents subscribers for the past month, with our first answer starting back on January 16 with a specific canola sale strategy.
President | CEO
@FarmLead or @GrainCents on Twitter
At 7:45 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2494 CAD, $1 CAD = $0.8004 USD)
Mar Corn: +0.5¢ (+0.15%) to $3.678 USD or $4.595 CAD
Mar Soybeans: +0.3¢ (+0.02%) to $10.175 USD or $12.712 CAD
Mar Soybean Meal (per short ton): +$0.90 (+0.25%) to $370.80 USD or $463.27 CAD
Mar Soybean Oil (cents per lbs): unchanged at 31.80¢ USD or 39.73¢ CAD
Mar Oats: +1.5¢ (+0.55%) to $2.673 USD or $3.339 CAD
Mar Wheat (Chicago): +1¢ (+0.2%) to $4.568 USD or $5.707 CAD
Mar Wheat (Kansas City): +2.8¢ (+0.6%) to $4.725 USD or $5.903 CAD
Mar Wheat (Minneapolis): +3.3¢ (+0.55%) to $6.035 USD or $7.54 CAD
Mar Canola: -1.8¢/bu / -$0.80/MT (-0.15%) to $11.408/bu / $503/MT CAD or $9.131/bu / $402.60/MT USD
COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.