There could be a lot of factors pushing oilseed markets in different directions in the months leading to spring seeding next year.
Often crop prices rally in late winter during the annual battle for acres, in which the market tries to give farmers the signals needed to ensure adequate production of the various grains and oilseeds.
However, the prospect of a record large South American harvest and falling crude oil prices could put grain prices under pressure in February and March.
Although down significantly from recent years, prices have been surprisingly well supported in the fourth quarter of this year, considering the large crops produced in the Northern Hemisphere.
An example came in recent days as canola futures showed surprising resilience, shaking off the negative effects of a larger crop forecast and falling crude oil prices.
Statistics Canada last week pegged the crop at 15.555 million tonnes, up about 1.5 million tonnes from the September forecast and 500,000 to a million tonnes more than analysts’ expectations.
Initially futures fell but by Dec. 8 had bounced back to the pre-report trading level.
They were supported by solid soybean futures and disciplined farmer selling here and in the United States.
U.S. soybean values are supported above US$10 a bushel by record export sales. The United States has already sold 85 percent of what the U.S. Department of Agriculture expects will be sold. The strong exports and domestic consumption should trim the burdensome soybean carryout forecast.
However, oilseed prices could face headwinds in the new year.
The transportation problems in the U.S. that contributed to the soymeal shortage that lifted soybean prices this fall are getting resolved.
Another threat is the South American soybean crop.
Seeding is winding up and early growing conditions are good.
Dry weather in early October in Brazil temporarily stalled seeding progress and that will push back harvest of early seeded beans until mid-February.
However, new Brazilian soybeans will put downward pressure on the market once they become available.
As well, European rapeseed growers are not doing much to help lift oilseed prices.
The first forecast of the European Union’s 2015 rapeseed crop shows reduced production expectation.
However, Strategie Grains said the 10 percent decline to 21.6 million tonnes would still represent the second largest rapeseed crop ever grown in the bloc.
Looking ahead to the 2015 U.S. seeding season, American farmers might look at corn prices that barely cover their costs of production and decide to plant more soybeans, which require fewer costly inputs.
Also, crude oil prices are expected to continue to fall. That could reduce the amount of vegetable oil used in biodiesel and pressure vegetable oil prices lower.
Investment bank Morgan Stanley said this week crude could fall as low as $43 a barrel. The Organization of Petroleum Exporting Countries recently voted to maintain production despite growing surplus of global oil stocks.
The peak oversupply and greatest downward price pressure would likely occur in the second quarter of 2015, Morgan Stanley said.
While weaker crude oil will weigh on oilseeds, the effect will likely be partly offset if the falling energy prices also weaken the Canadian dollar, as expected.