Nothing has changed the fundamental picture of oversupply, but oilseeds were enjoying a bit of a rally Feb. 14 as this was written.
The spark was a U.S. Department of Agriculture report last week that sliced 1.5 million tonnes from its forecast of Brazilian soybean production, making the new total 63 million tonnes. But that is up 10.4 million tonnes from last year.
The problem is a dry pocket in the south of the country, and a forecast for continuing dryness this week kept upward pressure on soybean prices. But the rest of Brazil has good moisture.
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Soybean rust has been found in more areas that last year, but the USDA said local agriculturists report farmers are doing a good job of spraying and do not expect yield loss.
USDA reduced global soybean production by 2.2 million tonnes to 228.6 million tonnes with the cut in Brazil accompanied by small reductions in India and Uruguay.
But that was more than offset by a lower global use forecast, resulting in a year end stocks estimate of 61.35 million tonnes, up 550,000 tonnes from the month before.
So there is no strong supply-demand fundamental support for this rally.
How high could soybeans go? Some analysts say a technical analysis of the charts point to $5.50 US per bushel as possible if the dryness continues.
Working against the increase will be the fact that farmer deliveries will pick up as the price rises.
Winnipeg canola futures were also rising Feb. 14. This might present a selling opportunity for farmers. Remember, some analysts have noted that canola prices could be pressured lower in late winter when farmers start delivering to get cash flow for spring seeding.
The USDA also noted another factor that will weigh on oilseed prices all year: record palm oil production in Malaysia, the world’s largest producer of palm oil, which competes in the oilseed market against soy and canola oil.
USDA noted output in the October to December quarter exceeded output last year at the same time by more than 500,000 tonnes. Government and trade sources attributed the increase to larger planted area, increased private investment and improved yield from newly maturing trees.
