Crude oil futures fell sharply Tuesday, dragging down all commodity prices, including crop futures.
Crude is falling on lackluster demand and adequate supply despite disruptions in Libya.
Investment house Goldman Sachs started the ball rolling on Monday, warning of a substantial pullback in oil prices because speculators had pushed prices ahead of fundamentals.
It forecast that Brent oil, the price of North Sea oil, could fall to $105 per barrel from its recent high of about $127.
It said oil inventories and spare production capacity are better than they were in 2008.
On Tuesday the International Energy Agency warned that recent high prices have hurt global demand for energy.
Goldman Sachs also said it was time to sell its commodities investment basket of crude oil, copper, cotton, soybeans and platinum to lock in profits. It said there was still strong potential upside in soybean prices, but the metals could suffer as high oil prices and Japan’s continuing problems from the earthquake and nuclear crisis eat into global economic growth.
There were minor changes in crop market fundamentals.
For the first time in 15 years, Chicago corn futures were higher than Chicago wheat futures. That should help increase the use of wheat in livestock feed rations.
Oil World now believes the rain that plagued Brazil’s soybean harvest did not hurt the volume.
It raised Brazil’s soybean crop by 1.5 million tonnes to 72 million tonnes. Last year it harvested 68.6 million tonnes.
Oil World raised Argentina’s crop by 500,000 tonnes to 49 million tonnes, but still down from 53.9 million harvested in 2010.
It forecasts soybean supply in the five major South American producers at a record 141.4 million tonnes, up about two million tonnes over the record set last year.
An expectation of substantial year-end U.S. wheat stocks is offsetting the support from drought damage in the U.S. hard red winter wheat crop. The weekly crop condition report said 37 percent of the Kansas crop was poor to very poor (last year it was five percent).
Texas was 66 percent poor to very poor (last year 10 percent) and Oklahoma was 60 percent poor to very poor (four percent).
The soft red crop is in good shape.
Snow melt is causing flooding in many areas of the Canadian Prairies and the U.S. Northern Plains.
Winnipeg (per tonne)
Canola May 11 $568.60, down $13.60
Canola Jul 11 $577.30, down $13.70
Canola Nov 11 $565.20, down $13.20
Canola Jan 12 $571.70, down $13.20
The previous day’s best basis narrowed to $9.60 under the May contract according to ICE Futures Canada in Winnipeg.
The May contract’s Relative Strength Index was 42. The rule of thumb is an RSI of 30 indicates an over sold market and 70 indicates an over bought market.
Western Barley May 11 $200, unchanged
Chicago (per bushel)
Soybeans May 11 $13.29, down 39.5 cents
Soybeans Jul 11 $13.4025, down 39.5 cents
Soybeans Nov 11 $13.4325, down 37.0 cents
Corn May 11 $7.525, down 23.5 cents
Corn Dec 11 $6.365, down 20.75 cents
Oats May 11 $3.91, down 10.5 cents
Oats Jul 11 $3.995, down 10.5 cents
Minneapolis (per bushel)
Spring Wheat May 11 $9.1175, down 24.0 cents
Spring Wheat Jul 11 $9.195, down 24.5 cents
Spring Wheat Dec 11 $9.33, down 26.75 cents
Light crude oil nearby futures in New York fell $3.67 to $106.25 US per barrel. It has fallen $6.54 in two days.
The Canadian dollar at noon was $1.0390 US, down from $1.0474 the previous trading day. The U.S. dollar at noon was 96.25 cents Cdn.
The Toronto Stock Exchange composite index fell 195.46 points, or 1.4 percent, at 13,801.40.
The Standard & Poor’s 500 index fell 10.3 points, or 0.78 percent, to 1,314.16.
