Canola is the latest crop to see its futures price record toppled.
On Feb. 28, the July contract hit $725 or $16.44 per bushel, surpassing the previous record of $724 set in June 1984.
The following day, all contracts for the 2007-08 and 2008-09 crop years surpassed the $724 record and on March 3 as this column was written, contracts rallied again.
Canola futures rose but wheat was shaky, with some observers thinking the peak has been posted in wheat and big investment funds backing off and taking profits.
A key difference between the wheat and canola futures is the spread between old- and new-crop prices.
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In the Minneapolis spring wheat runup, most of the action was in the 2007-08 contracts. Old crop at times was more than $10 per bu. higher than new-crop futures, reflecting bare bones stocks for the next few months and the expectation of lower prices once the new crop is harvested.
In contrast, Winnipeg canola old- and new-crop futures have moved higher together, with the new-crop November contract at a premium to the old-crop March.
The November contract on the morning of March 3 was trading near $760 per tonne, or $17.24 bu., while the Minneapolis wheat December contract was $11.50 US per bu.
If this holds, it gives a strong signal to seed canola over wheat this spring. Soybeans have seen a similar runup and also are priced at a premium to wheat.
So it should not be surprising that recent estimates of spring wheat area in Canada and the United States are of steady acreages or perhaps even less than last year.
The talk about increased wheat production in 2008-09 is based on the winter wheat acreage seeded last fall and hopes for better growing conditions this coming spring and summer.
There was an unusual number of weather problems last year that hit almost every continent and a repeat this year might be considered a long shot.
But there are worrisome situations this winter that could be disastrous if they continue into the growing season.
We have talked before about La Nina, the cooling of water in the eastern equatorial Pacific. It is thought to be at least partly responsible for dry conditions in the U.S. winter wheat belt in recent months and snowy weather in the Midwest corn and soybean region. Forecasting models are split on whether La Nina will persist into the Northern Hemisphere summer.
But we haven’t yet talked about dry conditions in China’s northern provinces.
This is the Asian giant’s second problem this winter.
The first was cold and snow that hit central and southern regions in January, with the damage to the rapeseed crop more than wiping out all the gains expected from a 40 percent increase in acreage.
Since the freeze, the Chinese have bought a lot of soybeans and canola and that is the main trigger behind the runup in canola prices.
Late last week, the Beijing government said it would promote increased oilseed planting this spring to make up for losses in winter rapeseed.
The snow provided good moisture for a lot of China winter wheat region that lies mostly south of Beijing. The winter crop produces 85 to 90 percent of China’s wheat.
But it is dry around the capital and areas north and northeast into Manchuria. This area produces about 40 percent of China’s corn, 45 percent of its soybeans and almost all of its spring wheat.
China’s meteorological administration said Feb. 20 that northeastern regions could expect a drier than normal spring.
That doesn’t ensure reduced production and China maintains large grain reserves against the risk of production problems. But it presents a potential challenge for a country whose food needs increase each year.
