It's Your Business
Winnipeg, MB, Jan. 3, 2013 (CNS Canada), Jan 03, 2013 (Commodity News Service Canada, Inc. via COMTEX) --
The start of a New
Year is a time of reflection and also a time of looking forward.
As history has a habit of repeating itself, what were the big
factors that moved the grains and oilseeds in 2012 And what
might we expect this new calendar year
One - Marketing - As far as Western Canada was concerned;
the big story in 2012 was the end of the Canadian Wheat Board's
long-standing single desk for marketing wheat, durum, and barley.
That story is still playing itself out, but the fact the changes
happened in a year where wheat prices were quite high surely
helped the transition. Wheat acreage increases are being talked
up for 2013, as it turned out to be a good cash crop in 2012.
Two - The economy - The looming global economic collapse
and/or looming turnaround to improvement, provided constant
fodder for speculative money flows during the year. Whether or
not the US falls off its 'fiscal cliff' in 2013, the sputtering
global financial system will remain a feature in the grains and
oilseeds as well. The key takeaway - if investors are confident
in the economy and are throwing more money into riskier assets,
the agricultural commodities also benefit. However, a side
influence on Canada under such a scenario is a stronger Canadian
dollar, which makes Canadian exports a little less attractive.
Three - The weather - It was too wet in some areas, too dry
in others, and a big wind at harvest time caused problems as well
- cutting into Canadian production overall. In the US, drought
conditions remain a concern heading into 2013. Europe and the
Black Sea region have dryness issues of their own, while the
weather is a bit of a mixed bag in South America as soybeans and
corn are currently in the midst of their growing season.
Four - South America - Brazil and Argentina are forecast to
grow record large soybean and corn crops this year, and the
possibility of that large production is overhanging the markets.
However, North American supplies are tight, which means that
production will be needed to meet demand and any problems that
develop over the growing season should provide a boost to the
North American markets.
Five - China - China played the Grinch and cancelled nearly
a million tonnes of US soybean purchases the week before
Christmas. That news added to the end of the year long
liquidation already weighing on prices and was bearish for canola
as well. The country is always a wild card, and what they buy, or
don't buy will be closely monitored once again in 2013.
Five - Charts - Canola, soybeans, wheat, and corn were all
trending down in the week before Christmas. However, prices on
all four commodities also closed out 2012 on a much higher
footing than 2011. Weekly charts would point to more downside
potential in the grains and oilseeds, but chart analysts can also
make an argument that values are consolidating before turning for
another leg higher. The charts are easier to make sense of in
hindsight, although as far as canola is concerned nearby prices
may fall to the C$540 to C$550 per tonne level before finding
Six - Supply/Demand - Regardless of what the charts may be
saying, or what's happening in South America and China, the
greater concern on the local level remains the cash price. Canola
supplies are forecast to be very tight at the start of the
2013/14 (Aug/Jul) crop year, and attractive bids in the country
are reflecting those concerns over tightening supplies. Canola
cash prices were all but divorced from the futures heading into
the New Year. The question now: Will the futures rise to reflect
the bullish fundamentals Or will demand from the crushers and
line companies finally be rationed causing cash prices to come
back in line with the futures Supplies of most other major crop
grown in western Canada are also forecast to be tighter at the
end of the current crop year in July 2013 compared to where they
were in 2012.
Seven - The fight for acres - With supplies on the tight
side for most of the main cropping options in western Canada, the
annual battle over what will go in the ground this spring could
get interesting. After pushing rotations for a few years, the
anecdotal reports suggest that canola will lose out to other,
cheaper to grow, alternatives in 2013.
How 2013 plays out remains to be seen, but all of the
preceding factors will definitely play their part in the ebb and
flow of the markets.
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