- Grain markets have faded back to the lower end of winter trading ranges
- Market focus is currently on record large South American crop prospects and emerging North American weather outlooks
Since peaking earlier this winter, grain and oilseed markets lost positive momentum during the month of March, fading back to recent lows and weighed down by favourable weather, available supplies and a general lack of bullish motivation.
Markets have faltered on improving South American crop prospects, while United States wheat futures broke on better moisture prospects for the southern plains' hard red winter wheat belt. Renewed crude oil selling, unable to sustain a correction from lows last week, represents a risk-off headwind for ag markets that are essentially marking time as we await more definitive updates on North American spring weather patterns and associated timeliness of spring planting.
Demand for U.S. beans remains quite strong - domestic crush and export
Chicago soybean futures dipped to their November lows as trade ideas of already record large South American crop prospects seem to expand daily. While demand for U.S. beans remains quite strong - domestic crush and export - the cumulative effect of record U.S., then South American, soybean production remains a negative price influence at this time.
The United States Department of Agriculture's quarterly grains stocks and prospective plantings reports on March 31 will provide the next clue of how much American grain moved to date and the acreage outlook for the spring.
Chart-wise, nearby May spot bean futures are fighting tooth and nail to hang on to the psychological support line at $10 a bushel, but the contract remains in a downtrend. As of March 22, $10.10 is immediate overhead resistance, but $10.20 is likely the big resistance point (200-day moving average).
Meanwhile, the November low of $9.92 is the next line of chart support. A break of support there would, territory from a technical perspective, open an abyss into $9.70 to $9.50 a bushel.
As the soybean market goes, all too often so too does the canola market. May canola last week slumped through support around $512 to $515 a tonne, then below the 200-day moving average at $508 and now flirts with its January low of $505 a tonne.
Prairie cash basis levels are more wide-ranging as some buyers are still actively sourcing canola, but others are not. This creates some disparity in Prairie canola cash bids. I suspect that as futures weaken, better cash basis will generally begin to emerge as commercial demand remains robust.
The move to fresh lows at $502 has so far stalled out as we see a modest response from the buy side that was finally something more than a shoulder shrug. But support at this level is not yet convincing. The May contract needs to get back above the 200-day average of $508, otherwise a break from here would target $490 as the next line of support.
The speculative managed money crowd moved from a modest long to modest net short position in canola futures. The commercial opinion is canola that overwintered in the field will soon be harvested and immediately move into the pipeline. The exact quantity and quality of that overwintered canola is up for debate, but it's certainly not going to be inventory that any grower wishes to store for any extended period of time.
Domestic and export demand for canola remains strong, although crush margins have trailed off as global vegetable oil markets deteriorated. But the canola market has a tendency to respond favourably going into the spring, and canola’s independent old crop supply and demand outlook appears to be tightening right now.
Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. Call
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