Weather conditions remained an important factor in determining price directions in both Canada and the U.S. during the week ended May 31. However, with seeding operations in Canada starting to wind down, the emphasis will be on planting operations in the U.S. Midwest.
Canola futures on ICE Futures Canada’s trading platform trended to the upside during the reporting period, with the weak Canadian dollar and steady demand from the commercial sector helping to encourage the advances. Much of the commercial interest was the pricing of routine export business, as well as covering new-crop domestic processor requirements.
Some processors were said to be still aggressively seeking canola, but for spot November delivery. The basis at some locations was easily $89 to $100 over the November canola future.
Support in canola was also derived from the need to keep a weather premium built into values, just in case. A lot of market participants are commenting that canola-seeding operations were progressing at a quick pace and early-seeded crops were developing very well. However, the crop is far from being harvested and there will be a few weather scares between now and the fall.
Some of the strength in canola also came from delays in putting the U.S. soybean crop into the ground, especially in the key growing regions of the U.S. Midwest.
ICE Futures Canada officials finally were in touch this week, and while they acknowledged there has been little interest shown for the milling wheat, durum and barley contracts, the exchange is not ready to give up on those futures quite yet. The exchange pointed out that conditions in the global wheat market are slowly changing and may help to encourage some use of these risk-management tools. Efforts will also be made this summer to encourage the big grain companies, as well as end-users, to give these futures a chance.
Tight soy supplies
Soybean futures at the Chicago Board of Trade (CBOT) posted some significant advances during the reporting period, with a lot of that upward price momentum linked to the tight supply situation.
Not only are old-crop stocks seen to be less than adequate, but worries about when new-crop supplies will be available have also surfaced. There had been ideas that planting of the soybean crop would be closer to being done and supplies would begin to become available sooner. However, it now appears these new-crop stocks will not be available until later in the autumn. Late development also leaves the soybean crop susceptible to an early frost.
Advances in soybeans, however, were capped by the taking of profits as well as cancelled export business by China, as values for the commodity began to get higher than China likes. Ample availability of cheap soybeans from South America made it easier for China to cancel the high-priced product from the U.S.
Corn futures at the CBOT also experienced some decent price gains, with much of the upward momentum again associated with the weather. The big problem for corn has been that while seeding of the crop has been decent in most of the smaller producing regions in the U.S., the crop in the U.S. Midwest is far from being in the ground. Extremely heavy precipitation has kept farmers in that area out of the fields, and outlooks calling for additional precipitation in the weeks ahead have prompted some participants to believe “millions of corn acres” will not be planted this summer.
If those huge corn acres are not planted, the ideas are that soybean area will grow as a result. That could temper the upside in those values as a result. As for the delays in seeding soybeans, a number of market participants are still convinced there is plenty of time to put that crop in the ground, as it’s not unusual to see those planting operations go until at least the second week of June.
Weather uncertainty managed to help wheat futures on the CBOT, MGEX and KCBT push higher during the reporting period, with spillover from the gains in corn also adding a friendly price floor. The upside in wheat was capped, however, by news that volunteer GM wheat was recently discovered at an Oregon farm in a field that grew winter wheat in 2012. The wheat showed resistance to the herbicide glyphosate. The wheat in question is reported to be a strain that was field tested by Monsanto from 1998 to 2005, but was never commercially produced as international opposition to GM wheat caused the company to stop the tests.
The GM wheat is said to be safe to eat, with no sign that any entered the market, according to the U.S. Department of Agriculture. While GM soybeans and corn are common in the U.S., no genetically engineered wheat has ever been approved for production in the country. USDA is now investigating how the GM wheat came to be on the field and whether or not it is more widespread. Many importing countries are opposed to GM wheat, and Japan announced it was suspending purchases of U.S. western white and feed wheat in response to the discovery. The European Union has also said it will test incoming shipments and block any that contain GM wheat.
Field tests on glyphosate-resistant Roundup Ready wheat were also conducted in Western Canada from 1998 through 2004.