Speculators’ chart-based interest punches up canola futures

Support in the outside oilseed markets allowed canola futures on the ICE Futures Canada platform to push slightly higher during the week ended March 8. Strength in canola earlier in the week was derived from chart-based buying by speculative and commodity fund participants. Steady demand from the domestic and export sectors, combined with concerns about tight supplies, also underpinned values.

The upside was capped when the push higher in canola ran into technical resistance. Profit-taking further limited the upside as did steady farmer deliveries of canola into the cash pipeline. Elevator companies, depending on location, were said to be offering decent bids in an effort to entice movement.

The upside in canola was also restricted by ideas that the commodity is overpriced in comparison to the other oilseed markets and needed to correct to the downside.

The May canola future tried and failed to push through some tough resistance in the $630- to $635-per-tonne region during the week. Support in the contract sits in the $600-$610 area. Technicians anticipate canola will continue to move in a sideways pattern until seeding issues in North America are more in focus.

Activity in the milling wheat, durum and barley markets on the ICE platform continued to be non-existent. Some arbitrage pricing by ICE occurred in milling wheat and barley, but no trades were reported. In fact, the little open interest that existed in these futures also has dwindled to almost nothing, especially with the March contracts coming off the board.

Old-crop soybean futures at the Chicago Board of Trade (CBOT) were able to push to higher ground reacting to concerns about tight supplies and the steady demand from China. The upside in the deferred soybean contracts was much more subdued, especially with the large South American soybean crop in the early stages of harvest.

Logistical issues in moving soybeans from Brazilian ports continued, but have slowly been sorting themselves out as they usually do.

Supply and demands

Activity in soybeans had been on the lighter side during the week, especially ahead of the U.S. Department of Agriculture supply/demand balance sheets scheduled to be released on Friday.

Participants were less than impressed with USDA’s decision to leave its U.S. soybean export and domestic usage forecast unchanged. Brazil’s soybean crop was pegged to be extremely large, surpassing the U.S. as the major producer of the crop. USDA did end up trimming its soybean production estimate in Argentina, but the downward adjustment was less than had been anticipated. Brazilian soybean output was pegged at 83.5 million tonnes while Argentina’s was projected at 26.5 million, down fractionally from the 27 million forecast a month ago.

With the large soybean harvest seen picking up steam in South America over the next few weeks, there were ideas that CBOT soybean values will have little choice but to slowly erode downward.

CBOT corn futures eased slightly, with liquidation ahead of the USDA report and the absence of demand from the export and domestic sectors behind the weakness. Improvements in the soil moisture situation in the U.S. Midwest, ahead of spring planting operations, also accounted for some of the bearish sentiment in the commodity.

Of the commodities, the USDA report actually had some friendly overtures for corn. The U.S. government agency projected tighter-than-anticipated domestic supplies of U.S. corn, with strong demand from the animal feed sector behind that decision.

USDA pegged U.S. corn stockpiles at the end of the current crop year on Aug. 31 at 632 million bushels. This is the smallest level of corn for that time period in 17 years. Drought during the growing season was linked to the tight stocks. There had been pre-report ideas that USDA would have raised corn stocks in the U.S. to 649 million bu.

USDA did lower its corn export projection, but that drop was easily offset by the 100-million-bu. jump in animal feed usage to 4.55 billion bushels in the current marketing year.

Wheat outlook improves

Wheat futures on the CBOT and Minneapolis and Kansas City exchanges continued their downward price push during the week, with the absence of demand from the export sector associated with the weakness. The improved soil moisture situation in the U.S. Winter Wheat Belt, as well as in northern U.S. spring wheat regions, contributed to the downward price slide.

USDA in its report put U.S. wheat supplies on May 31, the end of the current marketing year, at 716 million bu., which was up from the February forecast of 691 million. The release of these numbers helped to depress U.S. wheat futures.

Adding to the bearish sentiment in wheat was USDA’s decision to lower its current wheat export forecast by 25 million bushels. That decline was linked to stronger-than-anticipated foreign competition and larger-than-expected supplies in other wheat-producing nations.

USDA pointed out Ukraine and other European countries were stealing business away from the U.S.

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