Fats markets keep on breaking
A confluence of forces is taking vegetable oil markets lower. Soybean oil and palm oil prices (among others) have been on the defensive for the last few weeks. In fact, prices for the July soybean oil futures contract have hit their lowest point since the summer of 2016.
The first factor pressuring markets is the stretches of cold weather in the U.S. this winter that are driving crush demand for soybean meal. This has left adequate soybean oil available. Canola stocks are also very comfortable, even with solid demand. Palm oil production has also been surging. December through February usually sees a decline in output in Malaysia as stocks built up in the fall begin to dwindle. This year, however, stocks are swelling as production is crushing last year.
All of these factors fall in line with the incredibly strong seasonal pattern for soybean oil prices to be at a low point during January and February. Almost every year sees a pattern of weakness in the winter followed by support into the spring and summer. Look for this trend to apply in 2018 with strength returning to the fats markets in the months ahead.
Wheat prices have continued to move higher as drought conditions persist in the U.S. Plains. Forecasts do show a strong precipitation event coming to most of the distressed area. This has slowed the markets' rallies, but until rain comes and soil moisture reserves are assuredly improved, do not expect a total break in prices. Small acreage is known and the rough winter for weather points to a market that will be cautious to give back the recent gains.
Durum prices have traded modestly lower in the last couple of weeks. This has not been a result of any major fundamental shift, but simply a small correction in pricing out of Minneapolis.
The canola market has been seeing some pressure from the soybean and palm oil markets that were discussed previously. Palm oil stocks in Malaysia are at their highest January level since 2013 on production that was over 300,000 metric tons greater than a year ago. However, there has been support from the expectation of lower soybean output out of Argentina. Dryness during the growing season is clearly supportive for oilseed and product exporters with Argentina holding a significant market share for soybean meal and oil. Output losses are certain, but the magnitude is still unknown.
Also keeping canola afloat is the strength in European rapeseed markets. Generally, look for canola to keep track with soybean oil in Chicago. From day-to-day though, canola may deviate and find support on other news or canola-specific news.
Peas and lentils
There has not been a lot of news in the pulse market this week. Bids for Canadian peas and lentils have been light, keeping prices steady. India's lack of strong demand has kept a bearish tone in the pulse market. Due to government action, Indian farmers are incentivized to grow more, and imports have strong duties in place for many items. This has led to a slight increase in planting of pulses for the rabi crop. This year's rabi pulse crop planted area is up to 16.91 million hectares from last year's 16.19 million hectares. This is a new record for pulse-planted area and points to greater self-sufficiency for India.
Mustard seed export movement remains slow. The Canadian Grains Commission reported just 400 metric tons cleared through reporting terminals in the previous week. Total exports to date have now reached 10,400 metric tons compared to 10,600 metric tons in the previous marketing year.