Recent fund buying helps push up canola cash prices
The largest question that the oilseed markets has been dealing with over the past three weeks is, “how many additional U.S. soybeans will China buy from the U.S.?”
An additional commitment of eight million tonnes was announced on social media by U.S. President Donald Trump in the first week of February.
There has been no confirmation of the additional purchases by China or other members of the U.S. administration.
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The soybean market has rallied by close to 70 cents per bushel since Trump’s post.
Markets have been driven by a number of factors, including funds buying back their short position in soybean futures.
For the week ending Feb. 10, funds bought back a net of 94,316 contracts (12.8 million tonnes).
They now hold a net long fund position of 123,148 contracts. This is the largest net fund position in soybeans since the end of last year.
Fund buying during the week was not limited to soybeans because soybean oil and canola also benefitted from fund buying.
Net fund purchases of soybean oil were 23,252 contracts, which pushed the fund position to 33,093 contracts net long. This is the largest long position in soybean oil by the managed funds since mid- August of last year.
Funds shift to long on canola
Canola also benefitted from fund purchases during the past week, with funds buying a net long of 42,801 contracts to end up with a long position of 145 contracts.
This is the first long position reported by the funds since the announcement of Chinese tariffs on canola seed in mid-September.
Although the long position by the funds is not substantial, the fact that significant purchases of canola contracts occurred during the week has given the market some momentum.
Fundamentals for the canola market haven’t changed since the announcement of the agreement with China in the middle of January. Chinese purchases have been rumoured, but shipments will only begin to occur in the next few weeks.
Canola cash prices on the Prairies have gained some momentum from the increases in the futures market.
Canola futures are more than $10 per tonne above their value last year at this time. Cash prices are even better with values up by $15 to $20 per tonne.
On many occasions, we blame funds for moving the market downward, but we should remember that this goes both ways.
The main beneficiary of the fund purchases has been soybeans, which have rallied above the US$11.30 per bushel level in the nearby futures contract.
Fund buying last week helped push canola above the C$660 per tonne level in the nearby contract.
Source: producer.com