After things have been beaten down long enough, even slightly bullish news can cause an outsized reaction.
That appeared to be the case Monday, as North American crop futures rose across the board, despite the lack of substantial bullish news.
Some felt the Friday U.S. Department of Agriculture World Agricultural Supply and Demand Estimates finding of slightly lower than expected corn yields helped provoke investors who had gone short to get out of their winning positions.
“We just had a big wave of short-covering come in,” said broker Ken Ball of P.I. Financial.
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As the harvest in southern Alberta presses on, a broker said that is one of the factors pulling feed prices lower in the region. Darcy Haley, vice-president of Ag Value Brokers in Lethbridge, added that lower cattle numbers in feedlots, plentiful amounts of grass for cattle to graze and a lacklustre export market also weighed on feed prices.
Crop futures have fallen for months, and many investors have taken short positions on the expectation of further declines. They had been watching their profits grow as the market fell.
But now traders have been watching for a turn around, because prices can’t fall forever, given that most of the bad news and pessimism is already built into today’s prices.
Indeed, during the wild stock market sell-offs of a couple of weeks ago, crop futures were unusually stable, suggesting there wasn’t much easy longside blood left to spill.
Now the speculation has turned to what could inspire a short-covering rally and Ball thinks the slight bullishness of Friday’s USDA was enough for a couple of days’ worth of rally.
Not only was there reason to be slightly bullish based on the WASDE corn yield number, but if a trend develops of reducing projections in future monthly reports, the fundamentals start to look a lot less bearish.
That’s enough to make many speculative investors look to protect their profits and exit short positions.
“You could trigger a lot of short-covering here and they’re going to see if they can trigger it,” said Ball of aggressive traders.
While most U.S. futures markets rose early in trading then plateaued, canola – which rose overall during the session – hit a late wave of selling. Ball thinks that was probably farmers pricing the bigger-than-expected crops they’re havesting.
“There’s a lot of canola to be sold,” he said.
Wheat futures rose the most of any crop on Monday and that was partly due to unexpectedly large U.S. wheat exports over the past week. While year-to-year volumes are lower, the sudden surge in offshore wheat sales caught traders flat-footed.
Light crude oil nearby futures in New York were down 63 cents to US$44.00 per barrel.
The Canadian dollar at noon was US75.36 cents, up from 75.32 cents the previous trading day. The U.S. dollar at noon was C$1.3270.
Winnipeg ICE Futures Canada dollars per tonne
Canola Nov 2015 471.80 +2.00 +0.43%
Canola Jan 2016 475.40 +2.30 +0.49%
Canola Mar 2016 477.60 +1.60 +0.34%
Canola May 2016 478.00 +1.30 +0.27%
Canola Jul 2016 477.40 +1.40 +0.29%
Milling Wheat Oct 2015 230.00 +5.00 +2.22%
Milling Wheat Dec 2015 230.00 +5.00 +2.22%
Milling Wheat Mar 2016 234.00 +5.00 +2.18%
Durum Wheat Oct 2015 340.00 unch 0.00%
Durum Wheat Dec 2015 340.00 unch 0.00%
Durum Wheat Mar 2016 345.00 unch 0.00%
Barley Oct 2015 184.00 unch 0.00%
Barley Dec 2015 184.00 unch 0.00%
Barley Mar 2016 186.00 unch 0.00%
American crop prices in cents US/bushel, soybean meal in $US/short ton, soy oil in cents US/pound
Chicago
Soybeans Nov 2015 884.25 +10 +1.14%
Soybeans Jan 2016 887.5 +10 +1.14%
Soybeans Mar 2016 889 +10 +1.14%
Soybeans May 2016 889.25 +9.5 +1.08%
Soybeans Jul 2016 892.75 +9.75 +1.10%
Soybeans Aug 2016 891.75 +9.75 +1.11%
Soybean Meal Oct 2015 314.3 +3.4 +1.09%
Soybean Meal Dec 2015 312.8 +3.5 +1.13%
Soybean Meal Jan 2016 310.8 +3.6 +1.17%
Soybean Oil Oct 2015 26.93 +0.28 +1.05%
Soybean Oil Dec 2015 27.13 +0.28 +1.04%
Soybean Oil Jan 2016 27.44 +0.26 +0.96%
Corn Dec 2015 393.5 +6.5 +1.68%
Corn Mar 2016 404.75 +6.5 +1.63%
Corn May 2016 411.75 +6.5 +1.60%
Corn Jul 2016 416 +6 +1.46%
Corn Sep 2016 408.5 +4.75 +1.18%
Oats Dec 2015 232.75 +2.75 +1.20%
Oats Mar 2016 232.75 +1.75 +0.76%
Oats May 2016 234.5 +1.75 +0.75%
Oats Jul 2016 235.5 +1.75 +0.75%
Oats Sep 2016 235.5 +1.75 +0.75%
Wheat Dec 2015 501.25 +16.25 +3.35%
Wheat Mar 2016 510 +16.5 +3.34%
Wheat May 2016 515 +16 +3.21%
Wheat Jul 2016 518.75 +15.5 +3.08%
Wheat Sep 2016 527.25 +15.5 +3.03%
Minneapolis
Spring Wheat Dec 2015 524.75 +13.25 +2.59%
Spring Wheat Mar 2016 538.25 +12.25 +2.33%
Spring Wheat May 2016 548 +11.5 +2.14%
Spring Wheat Jul 2016 558 +11.5 +2.10%
Spring Wheat Sep 2016 568 +11.75 +2.11%
Kansas City
Hard Red Wheat Dec 2015 496.25 +14 +2.90%
Hard Red Wheat Mar 2016 510 +14 +2.82%
Hard Red Wheat May 2016 520 +14 +2.77%
Hard Red Wheat Jul 2016 529.5 +14 +2.72%
Hard Red Wheat Sep 2016 543.5 +13.5 +2.55%
