It isn’t just the main US ag contracts which have been struggling of late, of course, but those not so much in the spotlight too.
Take Winnipeg canola, which has faced pressure not just from the trend weaker in grain and oilseed prices generally, but a strong Canadian dollar, which has gained some 8% this year against the US dollar, so undermining the competitiveness of Canada’s exports.
Canola prices have also suffered from China’s decision to tighten import requirements on shipments of the rapeseed variant coming from Canada, the top exporter.
China has cut to 1%, from 2-2.5%, the amount of “dockage” – ie foreign material such as straw – permitted in purchases of the oilseed from Canada, and is reportedly considering similar criteria for Australian supplies too.
Quite why China is making such a move is a matter for debate.
It is not as if the country is proving enthusiastic to grow its own supplies of the oilseed, with changes to a subsidy scheme undermining domestic production prospects, as the International Grains Council highlighted.
“Following the removal of the government’s stockpiling scheme, and the associated drop in domestic prices, 2016-17 [canola] plantings in China contracted by more than 10% year on year in favour of more lucrative crops, notably wheat,” the IGC said.
Indeed, with “reports suggesting that some crops may be lost to winterkill, overall  output is forecast at an eight-year low of 12.4m tonnes”, down from 14.1m tonnes reaped last year.
‘Poor new crop prospects’
It may be that the government is keen to get rid of what canola is has stockpiled (goodness knows, China has enough inventories of other crops to worry about) rather than see domestic users fill the supply void with imports.
The IGC raised by 200,000 tonnes to 4.0m tonnes its forecast for Chinese canola imports in 2015-16, “reflecting increased requirements… in the face of poor new crop prospects”.
The council also noted that Chinese buyers “are expected to be encouraged by attractively-priced Canadian supplies”, which may not be what Beijing wants to encourage.
Whatever, the furore has done few favours for Winnipeg-traded futures in canola which, on a spot contract basis, tumbled 5% at one point in the last session to the lowest level since April last year.
The best-traded May lot, which ended up closing 2.5% down in the last session, eased a further 0.2% on Friday as of 09:30 UK time (03:30 Chicago time) to Can$452.20 a tonne, and has now lost nigh on 8% so far in 2016.
Chicago’s benchmark oilseed, soybeans, was faring better, adding 0.3% to $8.67 ¾ a bushel for May delivery, looking for its first gain in four sessions.
It was a bit of a help that oil prices were firm, with Brent crude up 0.2% at $35.35 a barrel, important for soybeans given that soyoil, one of the two main soy processing products (with soymeal), is used largely to make biodiesel.
Soyoil itself for May gained 0.2% to 30.98 cents a pound, recovering from losses in the last session spurred by some poor weekly US export sales data.
As Terry Reilly at Futures International noted, “soyoil export sales were a poor 3,200 tonnes, and shipments were only 3,900 tonnes”
CHS Hedging said that “soyoil sales were terrible, with the second lowest total of the marketing year”.
‘All the more interesting’
But there is also a feeling of some surprise at the extent of negative reaction in ags in general in the last session to US Department of Agriculture’s estimates for US crop sowings for 2016.
Wheat, for instance, only managed small gains despite the US forecasting its lowest sowings of the grain in nearly half a century.
And while the USDA did forecast a rise in US corn sowings, “the market was anticipating the latest round of bearish data which makes it all the more interesting that it induced another round of selling” in the grain, Benson Quinn Commodities said.
The broker suggested that “some of the additional pressure is sneaking in out of South America as a weather scare becomes less and less likely and, moreover, less capable of making in impact”.
Certainly, latest forecasts for Brazilian crops have begun to sneak up again, after suffering dryness-related downgrades earlier in the season, with Agroconsult and Michael Cordonnier among commentators lifting estimates this week.
‘Market is oversold’
Nonetheless, Benson Quinn Commodities forecast that technical factors, at least, may offer some short-term support to prices.
“The market is oversold,” the broker said, adding that it would “not be surprised to see a short covering rally on Friday with a higher close”, particularly with the prospect later (after the market close) of official data on hedge fund positions showing a further increase in their net short in ags.
Large net shorts tend to raise questions of whether there is appetite for more such positions.
Furthermore, “charts should offer some support… with prices bumped up against long-term support”, Benson Quinn said.
Still, the market also has more data to come from the USDA’s outlook forum, with officials to follow up Thursday’s acreage numbers with full balance sheets for domestic crops.
‘Too much rain is evolving’
For now, wheat for May was up 0.3% at $4.55 ¼ a bushel, while May corn added 0.1% to $3.61 a bushel.
In New York, cotton for May eased 0.2% to 57.66 cents a pound.
Tobin Gorey at Commonwealth Bank of Australia flagged that weather forecasters think too much rain is evolving in some regions centre south Brazil”, bringing potential for “some damage or quality decline”.
However, the region is a small producer in world terms, limiting the impact on world prices.
(Source – http://www.agrimoney.com/marketreport/am-markets-canola-eases-further-against-the-ag-price-trend–3519.html)