Canola and other crop futures fell sharply Tuesday on reports that China’s government will soon announce plans to fight Newspapers in China reported that Beijing would soon unveil food price controls and put checks on speculation in agricultural commodities to reign in food inflation that is running at 10 percent.
Additional talk that China will also limit the amount of credit available also pressured other commodities such as metals and crude oil.
Crop commodities were also hammered as the U.S. dollar gained against other currencies as worried rose over Ireland’s debt crisis. Previously, funds had been taking money from U.S. dollar investment and putting it into commodities as hedge against inflation, but now money is flowing back into the safety of the U.S. buck.
Ireland has been forced to funnel billions to bail out its banks, causing its deficit to soar despite slashing government spending.
January canola lost 3.3 percent on the day and closed below the 21-day moving average, raising concern that funds might increase selling due to technical weakness.
Oil World, the influential oilseed analysis publication, reported that profit taking and speculative selling could weaken oilseed and vegetable oil prices further, but the losses would be limited by the tight world supply. Future price direction will be strongly influenced by South American weather, Oil World said.
It is worth noting that a significant part of China’s food cost inflation is tied to soaring prices for vegetables, such as cabbage, potato and cucumber, as well as garlic and ginger. Bad weather and rising input costs were blamed for the rising costs, in addition to speculation.
In Winnipeg, the January canola contract fell $18.20 to $530.40 per tonne on 15,667 trades.
The March contract fell $18.10 to $537.50 on 2,418 trades.
The November 2011 contract fell $14.20 to $492.80.
The previous day’s best basis was $34.50 under the January contract.
The January contract RSI was 51. The rule of thumb is an RSI of 30 indicates an over sold market and 70 indicates an over bought market.
December barley futures were unchanged at $180.10 per tonne. March was unchanged at $185.
Chicago January soybeans fell 66.75 cents to $12.1975 US per bushel. March fell 66.75 cents to $12.27.
December corn fell 29 cents to $5.265 per bu.
December oats fell four cents to $3.425 per bu. March oats fell four cents to $3.55.
In New York, crude oil for December delivery fell $2.52 to $82.34 US per barrel.
The Canadian dollar at noon was 97.74 cents US, down from 99.35 cents the previous trading day. The U.S. dollar at noon was $1.0231.
The TSX composite index fell 133.18 points to close at 12,602.23. The S&P 500 fell 19.41 points to close at 1,178.34.
