$1000t January Canola

As I write this, November canola futures are at $1035t coming into the contract expiry.

I've been saying to clients $1000t canola is possible in the January, March, and May contracts if all positive factors remain the same. 

The previously expired July canola contract experienced something called a 'short squeeze' and it looks like the November is too.

A short squeeze for futures occurs traders are holding a short position (betting the market is going down) coming into the expiry of a futures contract.    
 
Traders need to cover (buy back) their short position in order to exit before the contract expires, thus driving the price up because they need to pay whatever the market is at.
                                                                                                           
Clients that have asked about trading the November canola contract and I've mentioned to only look at the long (buy) side, otherwise, they have the risk of the short squeeze that is happening.

Another major risk is there is no trading limit coming into the expiry for November canola, whereas the daily trading limit for other contracts is $60t.

One factor for canola to watch is a continued strong advance in palm oil has supported strength in the soybean oil market.
 
Palm oil production in Malaysia is set for its lowest in five years as planters attempt to deal with a major labor shortage.
 
Yields are not improving in top grower Indonesia either.
 
Also, strength in energy markets have added to the positive tone for vegetable oil markets
 
I’ve been saying to clients that we need to see strength in soybean oil in order to see canola have a larger rally.

Currently, the fundamentals and technicals are all pointing in the right direction.

Canola could still go higher without soybean oil, but the rally might be limited. 
  

Canola January Futures - 1 Year 
 

Chart sourced from Market Q

Wheat

December Minneapolis wheat is up $1.25/bu approx in October.

Last time Minneapolis wheat was at $10.40/bu is back in 2011. 

2008 levels of the $12/bu area is possible if traders don't want to give up on the buying.

Compared to the Chicago or Kansas markets Minneapolis is still relatively small giving large traders an opportunity to swing the market in their favor.

Currently, the direction is up for wheat, but that could change in a hurry.

I'm still not looking to hedge any next years crop for clients by selling futures because you don't want to fight the trend.

I would rather wait for a confirmation that the trend could be ending.

The main two stories funds continue to buy Minneapolis wheat on are....

1. Drought this year in major spring wheat production zones eroded stock levels and with good demand could lead to potential supply setbacks.

2. Inflation is going to push commodities higher. 

There isn't going to be any more wheat harvested this year so the real question is when will Minneapolis wheat get too expensive compared to the other wheats.

We might start to see some spreading between the different wheat contracts long Kansas or Chicago and short Minneapolis.  
  

Minneapolis Wheat December Futures - 1 Year
 

Chart sourced from Market Q

Chicago Wheat December Futures - 1 Year
 

Chart sourced from Market Q

Kansas City Wheat December Futures - 1 Year
 

Chart sourced from Market Q

Corn

December corn futures this week reached the highest price level since August on strong demand signals. 
 
Increased ethanol demand and expectations that U.S. corn is still very competitive on the world export market helped to spark the buying.
 
It was reported U.S. ethanol production last week nearly broke the all-time weekly high
 
This is the second week of near record output.

Going back to 2015, this was the highest weekly profit margin for ethanol, which would suggest corn usage for ethanol production should continue to advance rapidly.

When viewing export prices from the U.S., Argentina, Brazil, and Ukraine, U.S. corn remains the cheapest in the world and export sales should be strong over the near term.

With the surge in ethanol demand, there is a possibility that the USDA could eventually adjust corn usage for ethanol by 100-200 million bushels.
 
With December corn at $5.55//bu approximately the next level of major resistance is around $5.80/bu.

After $5.80 back to $6/bu and higher could be possible.
 

Corn December Futures - 1 Year 
 

Chart sourced from Market Q

Canadian Dollar

The Canadian Dollar increased 2.2 cents approximately on the December futures contract in October.

Since mid-October, the Canadian Dollar has traded sideways where it currently sits around 81 cents.

Oil prices increasing $12/bbl on WTI has been the main factor for the rally. 

Some of the rally is rooted in the domestic improvement of Canada and may reflect the weakness of the U.S. dollar, which would be a cause for concern.  

If the Canadian Dollar continues to move higher and does not reflect good developments for Canada, that could become more of a headwind on export projections.
A stronger currency is not normally welcomed because it can be a drag on trade, however, a high loonie may soon prove useful.

The reason: the post-pandemic inflation situation.

Inflation came in hotter than the BOC was expecting based on its forecasts.
In this environment, the strong loonie will act as a pressure valve by lowering imported goods prices.

Ie We have more purchasing power in other countries because our currency is worth more.

 

Canadian Dollar December Futures - 1 Year 
 

Chart sourced from Market Q

Cattle

 
December live cattle has increased from the month lows to the highest level since September 3rd.

Continued talk that the cash market may be able to rally significantly in the weeks ahead as seasonal demand for beef improves helped to support the buying.

Traders see tightening supplies into the end of the year due to smaller placements in September and tighter October 1 feedlot supplies than expected.

Weights remain low and feedlots are already current with marketing's.

Very strong profit margins for the packer and tightening supply this time of year might spark more aggressive buying in the live market. 

The premium of futures to the cash might be seen as a short-term limiting force.  
   

Feeder Cattle November Futures - 1 Year 
 

Chart sourced from Market Q

Live Cattle December Futures - 1 Year 
 

Chart sourced from Market Q

PI Financial Corp. is a Member of the Canadian Investor Protection Fund. The risk of loss in trading commodity interests can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. In considering whether to trade or the authorize someone else to trade for you, you should be aware of the following. If you purchase a commodity option you may sustain a total loss of the premium and of all transaction costs. If you purchase or sell a commodity futures contract or sell a commodity options you may sustain a total loss of the initial margin funds or security deposit and any additional fund that you deposit with your broker to establish or maintain your position.  You may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice, in order to maintain your position.  If you do not provide the requested funds within the prescribe time, your position may be liquidated at a loss, and you will be liable for any resulting deficit in your account. Under certain market conditions, you may find it difficult to impossible to liquidate a position. This is intended for distribution in those jurisdictions where PI Financial Corp. is registered as an advisor or a dealer in securities and/or futures and options. Any distribution or dissemination of this in any other jurisdiction is strictly prohibited. Past performance is necessarily indicative of future results.