January canola edges higher on stronger soy oil futures

Grain and oilseed markets started the first trading day of the new year higher on optimism about the last minute deal the U.S. Congress passed New Years Day that prevented tax increases and spending cuts.

But grain prices fell through the day on lack of follow through buying and on stronger North American currencies, which gained on the euro.

January canola closed Wednesday at $603.20 per tonne, up $1.40 or 0.23 percent.

March closed at $587.40, down $2.50.

Soy oil enjoyed the strongest early gain and closed up 2.7 percent because the new U.S. fiscal legislation extended a $1 per gallon tax credit for biodiesel that will run through 2013 at a cost of more than $2 billion.

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The strong veg oil price supported canola futures. Because of its high oil content, canola takes strong cues from soy oil prices.

Canola’s gains were limited by a soaring Canadian dollar that climbed about one cent on the U.S. buck.

After the initial boost from the U.S. fiscal legislation played out, the grain market returned its attention to lackluster recent weekly export data.

Chicago wheat closed the day down three percent because of slow U.S. exports.

Brazil reports that harvest has already begun on early seeded fields in Mato Grosso state, in what could prove to be a huge crop. Seeding and harvesting seasons are much longer in Brazil than they are in Canada. Because of a dry October, some fields had to be reseeded in November, which saw good moisture.

Mato Grosso, the leading soybean state, saw below normal moisture in December, but the deficit was not enough to cause concern and rain is expected this week. No. 2 state Rio Grande do Sul received above average rain in December.

In Argentina, seeded soybean crops are developing nicely. Excess moisture prevented some planting but those acres might be made up in other parts of the country.

Seeding continues with 84 percent of expected acreage in the ground as of Dec. 28.

The deal Congress agreed to was a stopgap measure and legislators will almost immediately clash on spending cuts and on raising the limit on borrowing. Republicans, who gave in yesterday to president Obama’s demand to increase taxes on rich Americans, promised to use the coming debt ceiling debate to win deep spending cuts in so called entitlement programs including Medicare for retirees and Medicaid for the poor.

With the Jan. 1 bill passed, income tax rates will now rise on individuals earning more than $400,000 and families earning more than $450,000 per year, and the amount of deductions they can take to lower their tax bill will be limited.

The Bush tax cuts, which were temporary, are now permanent for less-affluent taxpayers, along with a range of targeted tax breaks put in place to fight the 2009 economic downturn. However, temporary payroll tax cuts implemented during the recession will come to an end.

The tax package also includes a provision to extend for one year portions of the U.S. Farm Bill, which expired in September.

Several farm groups were sharply critical of legislators’ inability to pass a new farm bill.

Particularly hard hit were dairy producers who had hoped for assistance to deal with high feed prices. Congress simply extended the 2008 dairy programs, heading off high consumer milk prices, which would have resulted if nothing was done.

Snow and rain in the last week in the U.S. central plains, the southern Midwest and the West will help improve soil moisture and river levels, but the Mississippi in a stretch between St. Louis, Missouri and Cairo, Illinois, could still become too low to support commercial traffic by Jan. 7.

Winnipeg (per tonne)

Canola Jan 13 $603.20, up $1.40 +0.23%

Canola Mar 13 $587.40, down $2.50 -0.42%

Canola May 13 $581.00, down $3.30 -0.56%

Canola Jul 13 $577.90, down $3.40 -0.58%

Milling Wheat Mar 13 $290.50, unchanged

Milling Wheat May 13 $293.50, unchanged

Milling Wheat Jul 13 $295.50, unchanged

Durum Wheat Mar 13 $312.40, unchanged

Durum Wheat May 13 $316.40, unchanged

Durum Wheat Jul 13 $319.40, unchanged

Barley Mar 13 $247.00, unchanged

Barley May 13 $248.00, unchanged

Barley Jul 13 $248.50, unchanged

Chicago (per bushel)

Soybeans (P) Jan 13 $14.055, down 13.25 -0.93%

Soybeans (P) Mar 13 $13.9225, down 17.25 -1.22%

Soybeans (P) May 13 $13.8425, down 15.0 -1.07%

Soybeans (P) Jul 13 $13.82, down 13.25 -0.95%

Corn (P) Mar 13 $6.9075, down 7.5 -1.07%

Corn (P) May 13 $6.935, down 6.75 -0.96%

Corn (P) Jul 13 $6.9075, down 6.5 -0.93%

Oats (P) Mar 13 $3.355, down 12.0 -3.45%

Oats (P) May 13 $3.4275, down 11.75 -3.31%

Oats (P) Jul 13 $3.4725, down 10.5 -2.94%

Minneapolis (per bushel)

Spring Wheat Mar 13 $8.415, down 24.0 -2.77%

Spring Wheat May 13 $8.5175, down 23.5 -2.68%

Spring Wheat Jul 13 $8.615, down 23.5 -2.66%

Spring Wheat Sep 13 $8.6225, down 24.5 -2.76%

The Canadian dollar soared about one cent higher, with the Bank of Canada noon rate at $1.0143 cents US, up from $1.0051 the previous trading day.

The U.S. dollar was 98.59 cents Cdn.

Crude oil in New York rose $1.30 to $93.12 per barrel.

The deal averting the fiscal cliff boosted equity markets.

The Toronto Stock Exchange’s S&P/TSX composite index was up 127.30 points, or 1.02 percent, at 12,560.83, after earlier reaching 12,588.75, its highest since March 27 last year.

The following is a correction on the closing positions of U.S. markets. The numbers posted Wednesday were incorrect.

The Dow Jones Industrial Average rose 308.41 points, or 2.4 percent, to 13,412.55. The S&P 500 index climbed 36.06 points, or 2.5 percent, to 1,462.25. The Nasdaq Composite rose 92.75 points, or 3.1 percent, to 3,112.26.