Canola futures jumped higher on Monday, lifted by the rally in soybeans sparked by the falling U.S. dollar.
A weekend meeting of the G20, the world’s largest economies, called to discuss currency issues, produced a commitment to “market determined exchange rates” but failed to launch firm policies. This led investors to believe the U.S. Federal Reserve would soon announce more stimulus measures that would lower the cost of borrowing. That caused the greenback to fall against most currencies.
As other currencies rise, it makes U.S.-produced commodities and goods more affordable to foreign buyers.
That caused soybeans to rise 18.25 cents and corn to rise 8.75 cents.
Canola was also supported by lack of farmer selling.
Check out my Marketwatch column in Thursday’s newspaper, which talks about the strong demand supporting canola’s rally.
While currency issues are boosting oilseed prices today, a fundamental issue might cause problems later this year.
One of the legs supporting oilseed prices at high levels is worry that the La Nina in the Pacific Ocean could bring dry weather to South American soybean crops.
It has been dry in Brazil, causing farmers to delay seeding. However, several weather forecasters on Monday issued outlooks that said general rain should develop in November, leading to normal moisture through the summer in Brazil.
If the rain materializes it would put downward pressure on oilseed prices.
In Winnipeg on Monday, November canola rose $11.60 per tonne to $525.40 on 5,830 trades.
The January contract rose $12.30 to $535.10 on 14,274 trades.
The previous day’s best basis was $18.33 per tonne under the November contract in the par region, according to the Winnipeg ICE Futures daily report.
The 14-day Relative Strength Index for November was 90 according to BarChart.com. 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 per tonne. March was unchanged at $185.
Chicago new crop November soybeans rose 18.25 cents to $12.1775 US per bushel. January rose 18.5 cents to $12.30.
December corn rose 8.75 cents to $5.6875 per bu.
December oats rose eight cents to $3.65 per bu. March oats rose 8.5 cents to $3.77.
In New York, crude oil for November delivery rose 83 cents to $82.52 US per barrel.
The Canadian dollar at noon was 98.06 cents US, up from 97.44 cents the previous trading day. The U.S. dollar at noon was $1.0198.
The TSX composite index closed at 12,663.58, up 62.40 points. The S&P 500 rose 2.54 points to close at 1,185.62.
