Oilseeds are enjoying a strong rally.
Chicago soybean futures topped $11 US per bushel for the first time in 34 years, partly on exceptionally strong weekly exports, mostly to China.
Crude oil prices just a shade under $100 per barrel also supported oilseeds.
Canola futures Nov. 23 topped the highs of November 2002 and are now surpassed only by the hot prices of the mid 1990s.
Other good news during the week was that the Canadian dollar did not rise, even though the American dollar dropped against other currencies.
Read Also
Saskatchewan, Manitoba sign Arctic Gateway deal
Saskatchewan, Manitoba and Arctic Gateway Group have signed an MOU to strengthen trade through the Port of Churchill.
Many believe the Bank of Canada will drop interest rates to stimulate the economy, pummeled by the strong loonie and feeling some of the effects of the slowdown in the U.S., where the housing mortgage shakeup is tightening credit and causing financial institutions to take huge writedowns on bad loans.
A lower interest rate would lessen foreign interest in the Canadian dollar and remove the threat of another rally to $1.10 US.
Some analysts have said that because canola prices have trailed soybeans, canola is now priced attractively in a vegetable oil-hungry world and the pace of exports might pick up.
It is certain that China is hungry for vegoil.
Its production of oilseed crops like soybeans and rapeseed have stagnated in the last five years and increasingly it has had to turn to imports.
Imports of soybeans have soared to a forecasted 33 million tonnes this year, up 98 percent in five years.
Canola imports are modest by comparison at a projected 1.25 million tonnes this year, but that is the largest amount since 2000-01.
Canola suffers from an unfair tariff treatment. The Chinese government has reduced the tariff on imported soybeans to one percent from three percent for two months. There is a nine percent tariff on canola imports.
In addition to seed to crush, China also imports vast quantities of vegetable oil.
Despite rising imports, cooking oil prices in China have risen by 50 percent since March. The government in Beijing, worried that shortages during the coming lunar new year holiday festivities would cause unrest, has decided to create an oilseed reserve and its activity in the market partly explains last week’s oilseed rally.
China’s vegetable oil shortages are partly the result of rural labour shortages as millions of country people flock to cities to find higher paying employment.
Chinese officials put on a brave face last week and predicted that the country will remain 95 percent self sufficient in grain production, if not oilseed production.
Reuters News Agency reported Beijing aims to double farm subsidies to the equivalent of about $4.5 billion and invest $1.75 billion in the pork, dairy and oilseed sectors.
The moves come after Beijing last year scrapped a farm tax to ease the burden on rural poor.
For years, Western analysts have speculated that China will soon have to import corn and wheat. Policy reforms in the last couple of years and luck with the weather have helped the country continue to be self sufficient in wheat and corn but the supply-demand balance is tenuous.
The new plan includes increasing wheat and rice yields, increasing the land area devoted to corn, planting more canola in the Yangtze River region and stabilizing soybean production in the northeast.
It also plans to shift farming toward large-scale operations from the current system of small holdings.
But this might be easier said than done. China suffers water shortages for irrigation and the supply of arable land is shrinking as cities and industrial regions expand. Even with the subsidies, rural people may find the wages of the big cities preferable to tilling the soil.
