MarketsFarm – As trading is most often volatile between Christmas and New Year’s, this week did not disappoint. Canola pretty much ran the gamut, swinging higher one day, falling back the next.
During the overnight session that ended on the morning of Dec. 30, the nearby January contract apparently hit a new all-time high when it reached C$1,100.70 per tonne. There were suspicions in the market that traders might attempt such a run given that January would soon cease trading.
The one catch is, according to Brugler Marketing and Management the all-time highest price continues to stand after 47 years. Brugler asserted the real record came on Nov. 6, 1974 when November contract hit C$1,101.00 per tonne.
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However, a colleague at MarketsFarm pointed out that the canola market was a much different entity way back then than it is today.
There was another first this week when for a short period of time that saw three contracts above C$1,000 at the same time. The January and the March have been trading in excess of the amount for some time, but they were joined by the May contract touched C$1,003 per tonne before stepping back.
It’s not only the whackiness that comes with this week of trading that pushed and pulled on canola, there were other factors. The major factor was the dry conditions throughout much of Argentina and across the southern half of Brazil. Those parched soybeans and corn crops were now a big concern to the North American markets. That was further amplified by more and more production forecasts trimming their numbers as the La Nina-generated dryness took greater hold.
Even when parts of southern Brazil got rain, the markets reacted exuberantly, pulling down prices for soybeans and soyoil on the Chicago Board of Trade (CBOT). A stark difference compared to the start of the week when prices spiked sharply.
With combines in Brazil’s Mato Grasso just having started their first rounds, the Chicago soy complex will soon feel the pressure from South America, and in turn, canola on the Intercontinental Exchange. Despite lowered production expectations, they are still well above those from last year’s record soybean crop for Brazil. And that will be followed by a fairly hefty bean harvest in Argentina in the 50 million-tonne range.
After the New Year, the first big test for canola will be the monthly supply and demand estimates and the quarterly grain stocks report from the United States Department of Agriculture. Essentially, canola will be affected by the reaction in the soy complex to both reports.
Until then, have a Happy New Year from all of us at MarketsFarm and Glacier Farm Media.
