Soy Supporting Canola...For Now

Adam Pukalo |

Support for canola this month has come from the soy complex and moderate increases in palm oil.  

March soybean futures have pushed near the top end of the range and look to still be in a positive trend.

Soybean oil has been trading more sideways, which I'm seeing if a positive trend could get going that could propel canola higher.

Recent weather in Argentina and South America have been the main driver for soybeans going higher. 

There does not seem to be enough rain in the forecast to avoid crop stress with little rain in the 2-week forecast. 

The forecast this far our is quite variable, but if it happens, significant stress could return to the fields causing major tightness in the meal supply.

Weakness in the energy complex and some strength in the U.S. dollar have been negative forces recently for commodities in general.

Last month I mentioned how I wanted to see the nearby March canola contract hold $860t.

On January 9th March canola went below $860t and by January 25th went all the way to a low of $791t. 

For those operations that are wanting to protect new crop it does seem like the trends have turned higher for canola right now giving an opportunity to buy put options again.

Canola March Futures - 1 Year

Chart sourced from Market Q
















Soybean March Futures - 1 Year

Chart sourced from Market Q

















It seems like wheat is trying to put in a short term low and Managed Money traders are still short a significant amount of contracts.

We could see a short covering rally if some type of positive news comes about.  

News of a potential high production and record high exports for the Australia crop this year helped to limit buying recently.

A Farm Futures survey showed U.S. producers expecting wheat planted area to come in at 48.8 million acres for the 2023/2024 season.

Using this estimate, plugging in trend yield of 49.2 bushels per acre and increasing usage to 1.952 billion bushels from 1.901 billion in 2022/2023 would put ending stocks at 706 million bushels, up from 567 million for the current marketing year. 

Even if all wheat yield comes in 3% below trend, ending stocks would still reach 647 million bushels.  

This means the fundamentals could support wheat to go lower still and combine that with the technicals the charts are pointing in that direction.

Minneapolis Wheat March Futures - 1 Year

Chart sourced from Market Q
















Chicago Wheat March Futures - 1 Year

Chart sourced from Market Q
















Kansas Wheat March Futures - 1 Year

Chart sourced from Market Q

















 While there is decent rain for the past week, Argentina corn growing areas should see just scattered rain amounts for this week and no rain in the forecast for next week. 

If this forecast verifies, many corn areas could be back under stressful conditions.

Crops in poor to very poor condition reached 32% before last week's rains as compared with 28% the previous week and 20% last year. 

More talk of a potential irreversible damage to the Argentina crop has helped to support the corn market.

With strong profitability for corn production this year, producers may shift to more acres in 2023. 

Hightower is estimating that planting could come in near 91.5 million acres, up from 88.6 million last year. 

Corn March Futures - 1 Year

Chart sourced from Market Q

















 The cattle markets seems to have the supply fundamentals in the months ahead to expect a resumption of the uptrend.

Yesterday, live cattle futures on the nearby contracts broke to new highs.

Beef prices are at the lowest level since December 22nd and cash markets remain sloppy, which are seen as negative forces.

January is a seasonally weak demand timeframe, but any actions which might tighten supply further could be seen as supportive.

I talk to clients a lot about trends and I believe the "trend is your friend".

In other words, I would not be going short cattle at this time or protecting as the trend remains higher. 

Feeder Cattle March Futures - 1 Year 

Chart sourced from Market Q
















Live Cattle February Futures - 1 Year

Chart sourced from Market Q