More adventurous investors may be watching the canola market, which could offer the
brave potential for large profits, if they can get the timing right.
The price of Winnipeg's March contract fell to Can$392.80 a
tonne in the last session, the lowest for a spot contract since June 2010, and
well below highs last summer above Can$650 a tonne.
Already this year Winnipeg canola has lost some 10%.
'Largest discount on
As well it may, of course, given the huge stocks of the rapeseed
variant left in Canada – of 12.6m tonnes at the end of 2013, up 55% year on
year, swollen by a record harvest.
However, the fall is noteworthy on two scores, the first
being the extent to which canola's discount to rival oilseed soybeans has increased.
"The discount of Canadian canola to US soybeans, at negative
$135 a tonne, is now the largest on record and contrasts sharply to the 10-year
average positive $38 a tonne," Luke Mathews at Commonwealth Bank of Australia said.
The second is the warmer weather in North America which is
freeing-up logistics, and so easing up that pressure on supplies.
Chicago futures in oats,
which have benefited from transport snarl-ups, given that the US relies on
Canadian imports for nearly half its supplies, have performed particularly poorly
this week, down 5.9% as of the last session's close.
(That said they did bounce on Friday, up 1.7% at $4.17 ¾ a
bushel for March as of 09:40 UK time, 03:40 Chicago time.)
Could, local, canola prices rise, potentially even closing
the gap with soybeans, as Canada's return to freed-up logistics boosts demand
Another twist could be the impact on foreign prices of smoother
has risen by 2.5% in 2014, in local currency terms, to close the last session
at E378.25 a tonne, but may now face greater competition.
Furthermore palm oil
has been performing well too, an interesting indicator for canola/rapeseed,
which is an oil-heavy oilseed, more so than soybeans which produce more of the
meal used in livestock feed.
Palm oil for April set a two-month high of 2,688 ringgit a
tonne in Kuala Lumpur in early deals, before easing back to 2,666 ringgit a
tonne, a gain of 0.4% on the day, and supported by idea of demand, including
Both Indonesia and Malaysia, the top producers, are boosting
mandated levels of biodiesel, derived from vegetable oils, in forecourt diesel.
As an extra boost, oil prices have been
stronger this month too.
Back to canola, and this was trading 0.6% higher at
Can$396.50 a tonne in Winnipeg, looking for its first winning session in six.
'Not many natural
And, of course, palm oil is getting a lift from soybeans,
the source of soyoil.
In Chicago, soybeans certainly did their best to keep ahead
of the game on Friday, maintaining their support on ideas that, with US
supplies still thin, demand may need more rationing (as Agrimoney.com pointed out earlier this week).
Particular attention is being paid to importers, and when
and to what extent the onset of a Brazilian harvest producing "extraordinary yields" according to the US Department of Agriculture will prompt Chinese
buyers (the biggest) to cancel existing orders for US supplies and switch to
"We don't have many natural sellers in the market," one US
"There are not many soybeans stored on-farm and we need to
see export sale cancellations in order to fit the USDA's projections."
While a big cancellation did come through on Wednesday, more
significant USDA data on Thursday showed China staying a net buyer.
More than 1m tonnes of soybeans headed for China too last
week, reducing the potential for cancellations – assuming, of course, that genetically-modified
crop taintings do not prompt a spree of rejections, as with corn.
"Weekly soybean export sales were below expectations, but as
long as it was a positive number and didn't include any Chinese cancellations,
it was friendly," CHS Hedging said.
The broker added that "assuming a normal amount of soybean
sales will be rolled into the next crop year, it's estimated we need to have 35m-40m
bushels of net cancellations in the second half of the marketing year to not go
over the current USDA export forecast.
"There has never been a year when there were net
cancellations in the second half of the marketing year."
Furthermore, the wetter Brazilian weather, while resolving
dryness in some areas, poses a threat to the progress of harvest and to shipments.
"A wetter Brazilian port outlook may slow the record-setting
early February loading pace," said Richard Feltes at Chicago broker RJ O'Brien.
Soybeans for March added 0.7% to a five-month high of $13.53
¼ a bushel.
The oilseed is also gaining technical kudos for having
passed through the psychologically important $13.50-a-bushel mark.
Wheat gained too,
by 1.0% to $6.01 ½ a bushel for March delivery, making its own technical landmark
in crossing $6.00 a bushel, and posting its highest levels since early January.
Signally, the contract also bust through its 50-day moving
average, above which it has not closed since October.
And there are technical boosts in the other US markets too,
with Minneapolis spring wheat in the last session "posting an outside higher
day, technically supportive", CHS said.
Minneapolis wheat or March gained 0.4% to $6.65 a bushel, a
two-month high for a spot contract.
While much of wheat's rise is technical, there is fundamental
cause too, with dryness in part of the US winter wheat area, and particularly
in the southern Plains hard red winter wheat belt.
"Some forecasts are calling for dry weather over the next 30
days," Brian Henry at Benson Quinn Commodities said.
"The relatively tight old crop carryout and smaller-than-expected
acreage leaves a smaller than usual margin for error for this year's crop.
"Whether or not the western half of the plains can break out
of a multi-year drought could be the key feature of the wheat trade this
Kansas City-traded hard red winter wheat for March was up
0.7% at $6.77 ¼ a bushel.
As for corn, it
maintained its sideways plod, adding all of 0.2% to $4.41 ¼ a bushel, supported
by ideas of string demand, but with hefty supplies to sell preventing upward