Wittal: Funds brace for possible trading restrictions

Jan. 27 –– The U.S. dollar pushed higher today and crude oil was lower, which in turn led to sharp losses in bean futures today.

There’s some concern about U.S. President Barack Obama’s State of the Union address this evening, in which he may announce restrictions on how aggressively banks can trade in the markets, which would certainly reduce how funds participate in the markets. This can be seen as good and bad, as it may reduce volatility in the markets, but that’s what also provides opportunity.

Some funds are clearing positions ahead of the speech tonight, which has led grain futures lower across the board.

Egypt again passed the U.S. up for an 180,000-tonne tender for wheat, and instead bought from Russia strictly on price, which tells the markets U.S. wheat values need to fall further to be competitive on the world markets.

Canola followed beans lower and barley followed corn down.

The U.S. dollar index climbed three-10ths of a cent today. Gold closed down $13.50 at $1,084.40. And the Canadian dollar fell 0.5 cents, to close at US93.82 cents.

The Dow Jones March contract closed up 47 points at 10,185 today.

In the energy sector, crude oil closed down $1.04 at US$73.67 a barrel.

Corn closed down 3.6-4.2 cents a bushel today, while beans closed down 14-18.4 cents a bushel.

Wheat markets closed down 5.4-10.2 cents a bushel today; Minneapolis March futures closed down 5.4 cents a bushel.

Canola closed down $6.40-$6.70 per tonne today. Western barley closed down $2, at $148 per tonne.

Brazil started testing in December for GMO (genetically modified organism) contamination in Canadian shipments of flax, and have found several containers that contain GM varieties, which has led to those shipments being held or suspended.

Brazil’s current policy on non-approved GMOs is zero tolerance, so the only options for these shipments are to either destroy the product or return it to the shipper, which is going to come at a great expense, not to mention another loss of market for Canadian flax due to contamination.

This shows how the actions of a few can severely impact the opportunity for many. Rules and regulations around seed production and delicensing of varieties exist for a reason, and when someone doesn’t follow the rules, it gets very costly for everyone involved!

That’s all for today. — Brian

— Brian Wittal has spent over 27 years in the grain industry, including as an elevator manager and producer services representative for Alberta Wheat Pool, a regional sales manager for AgPro Grain and farm business representative for the Canadian Wheat Board, where he helped design some of the new pricing programs. He also operates his own company, Pro Com Marketing, providing marketing and risk management advice for Prairie grain producers.

Brian welcomes feedback and information on market conditions in your area, such as current offering prices, basis levels, trucking premiums and special crops contracts.

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