If trading on the first day of the year is anything to go by, early 2010 looks good.
U.S. commodity futures markets climbed Jan. 4. The weaker U.S. dollar sparked some of the rally.
Gathering evidence of recovering U.S. and Chinese economies had traders pulling money from U.S. dollar denominated treasury bills and similar safe investments to put into commodities that will be needed to fuel the economic growth hoped for in 2010.
Agricultural commodities also benefited from the expectation that as the big investment funds rebalance their portfolios for the new year, they will give more weight to grains, oilseeds and meat. They think that agricultural commodity prices still have room to rise, whereas alternatives such as oil have exhausted their rally.
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On the first day of trade in 2010, this price-positive information dominated other price-negative information about the South American soybean crop.
Brazil, Argentina and other South American countries have seeded larger acreages to soybeans this year and the weather to date has been favourable. Some analysts think that as these crops get closer to harvest, they will start to weaken soybean prices.
Soybeans have been the strongest performer among the crop markets this crop year and if they drop, they would likely take down wheat, feed grains and canola by a similar percentage.
On the other hand, improving economic prospects should increase global food demand in the coming year. Also U.S. ethanol production is expected to rise, boosting corn demand.
That should make the annual battle for acreage in the northern hemisphere this coming spring another potential market lifter.
Soybean prices will continue to set the environment for the canola market, but exports will also influence the price trend.
The canola market remains uncertain about how much China will import in the second half of the year because of the blackleg issue. As of Jan. 4, there was no official word on whether China would grant import permits.
But a look at the export lineup for Vancouver to Jan. 10 gives hope that exports will be strong no matter what China does.
The tonnage of ships loading Dec. 31 or to arrive by Jan. 10 to take on canola was more than 320,000 tonnes. Last year in the same period, the total was less than 200,000 tonnes.
