Oilseed price support from the North American acreage battle trumped worries about slowing economic activity in China and the European Union that threatened to derail canola and soybean prices last week.
May canola topped $600 per tonne early last week but then fell more than $10 over the next couple of days as traders worried about demand as China’s economy weakens. But by the end of the week oilseeds were again rising and early this week May canola again climbed above $600.
Oilseed’s strength is partly due to the acreage battle in the United States.
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Although corn’s price is down a bit from recent highs, its level still has an edge over soybeans, particularly given the prospect of an early start to seeding in the U.S. Midwest.
But with forecasts for Brazil’s soybean crop dropping, there is pressure to stop a U.S. soybean acreage decline, so the market is trying push soybean futures higher to attract adequate seeded area.
The latest forecast on Brazil’s crop now pegs it at two to four million tonnes less than the U.S. Department of Agriculture’s March forecast of 68.5 million tonnes.
Crop forecaster AgRural puts Brazil’s soybean crop at 66.7 million tonnes. Oil seed analyst Oil World puts it at 66.5 million tonnes, but warns the crop could fall as low as 64.5 million tonnes and that prices would likely top $14 a bushel.
The strong support for soybean prices is helping to keep canola firm, although it also has independent strength because of tight supply and strong demand.
Although wheat is considered the weak man of the major crops because of large global stocks and expectations of a big 2012 crop, its outlook could improve a little.
With corn and soybean prices so high, North Dakota farmers might favour them over spring wheat and durum this spring, meaning U.S. wheat production might not be as large as earlier thought. Robert Arnason has a story on North Dakota’s seeding prospects on page 105.
We’ll get a better idea of what American farmers plan to seed March 30 when the USDA releases its seeding intentions report.
Reuters surveyed 19 analysts before the report for their thoughts on U.S. seeding. U.S. plantings of spring wheat other than durum ranged from 12 million acres to a high of 14.5 million.
The average was 13.313 million acres, which would be the fourth lowest in the last 20 years.
Also supporting wheat is news that cropping conditions in the European Union are not as good as they could be.
It appears the dry weather affecting much of the continent is making it hard for frost-damaged crops to recover.
Frost damage in Germany, eastern France, Poland, Hungary and the Czech Republic appears worse than initially forecast. That, combined with the lack of rain, is raising concerns about the 2012 crop.
