Tuesday, February 8, 2011

Future Price Direction for 2011/12 Canola

Prices for old crop canola (2010/11) seem to have taken a breather this week, and stabilised around $600 in VIC & SA ($630/mt WA). Whilst prices for new crop have keep an upward direction and reached their current contract highs of $620/mt in VIC & SA ($620/mt in WA)

Reason for last week’s sluggish movement? The futures market lacked some fresh supportive news, with China (who has been driving the demand side of this bullish market) on the sidelines for the Lular New Year. So we will get some idea of their buying indication (and future price direction) after the weeklong holiday finishes up the end of this week.

Supportive for Winnipeg canola this week was Statistics Canada updated their final canola stocks position for 2010 at 8.24mmt (the smallest level since 2007), compared to 9.44mmt in 2009. Although this number was tighter then expected, it shouldn’t came as too much of a surprise given that since August canola oil exports have been running at more then double their five year average. Speaking to a Andrew from CWB in Winnipeg today, he were saying authorities were already handing out sandbags for record floods that are anticipated when the snow melts in Mar/April! Potentially the 2011 could be worse then last year that severely delayed sowing. Still early days, but well worth keep an eye out for.

South American soybeans will be hitting the world markets next month, and with the latest forecast of a bumper Brazilian crop, may weigh on prices for the short term. The large crop may offset the declines in the Argentinean forecast, with the Argentine exchange keeping their forecast of 47mmt, but this still remains well short of the USDA’s January forecast of 50.5mmt. Timely rains across key soybean growing regions also was a drag on prices however has it got the potential to add yield or simply just reduced the El Nino inflected losses?

The USDA will release its February world supply and demand report this week, with the oilseed complex tasting yearly highs the market may succumb to profit taking and dump some positions. Nevertheless, the market maintains an overall bullish picture, with outlooks for the USDA to further tighten low projected US year-end inventories.

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