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Mustards: Three months of strong New Crop gainsThis past winter, many thought that Mustards would enjoy expanded acreage in 2014 and, so, New Crop prices were at steep discounts to old. However, once prices for other crops started to recover from the darkest period of the logistical nightmare, Mustards found themselves in a competitive environment and rallied to keep up. In recent weeks, despite softness in major markets, New Crop prices for Mustards have continued to gain ground. This suggests that commercials have been concerned about getting left behind and they responded aggressively. Was it enough? Taking Brown Mustard as an example, at first blush, the New Crop average delivered elevator price of $0.298/lb does not seem generous when compared to the current cash price up at $0.34/lb. Yet both prices look very good when compared to the 10 year average of $0.251/lb. So, it seems likely that Brown Mustard’s 2014 acreage will be adequate. Do not expect too much more in near term Mustard price gains.
Soybeans: Under pressure but not a one-way streetThe recent dramatic drop in Soybean prices is reminiscent of the 2013 retreat and, therefore, may not be finished yet. Back then, the bottom was not formed until Indian Soybean prices belatedly “threw in the towel” thereby indicating that capitulation was general, a good indicator of a true bottom. This remains to be seen. Now, New Crop Manitoba Soybean prices are well below Old Crop and, once the deferred futures contracts become the nearby, important support levels may be broken. This could keep sentiment on the defensive for awhile. However, the Manitoba Soybean’s Average Price chart contains two important features: first, prices have already dropped down towards the 8 year Average and are no longer expensive while, secondly, the 5 year Average prices do not run downhill in a smooth progression to their typical mid-October lows. Therefore, look for restoration of two-way trading in the near future, but it may feel more like a pause/reaction than lasting recovery.
Flaxseed: Caution strongly advised Saskatchewan average delivered elevator prices for Flaxseed could be vulnerable. New Crop pricing has refused to endorse Old Crop levels and the difference is more than $2/bu. Moreover, Flaxseed is very expensive compared to Canola in terms of the relative Value Ratio while the outright price spread of $4.50/bu rivals a previous historic high. Finally, Flaxseed’s 5 and 9 Year Average prices typically lose ground from July until September. Once current flooding concerns have been assessed by the market, there may be little holding up Flaxseed.
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Sunflowers: A very slow transition Sunflower prices have been slowly sliding for three whole years and might not be finished yet. Despite the graceful underlying curve that captures the decelerating bear market in North Dakota Nu Sun average delivered elevator prices that should eventually set the stage for a big bull market, all oilseeds have to contend with ongoing weakness in Soybean Oil. Although the speed of Bean Oil’s recent decline is characteristic of the sort of “washout” that can exhaust a bear and leave it ripe for a trend change, no reversal has been registered to date. Therefore, there is an important risk that this weakness could spill over into the Sunflower market. If so, Nu Sun average delivered elevator prices might erode towards the CDN$0.19/lb level. However, this might not necessarily pull Manitoba Sunflower FOB Farm prices lower because they seem to have avoided much of the volatility seen in other oilseed prices for the last year and may do so a little longer.
Canola: Requiem for a lost opportunity Canola is trading like Soy Bean Oil again and this closes the door on Bean Oil’s seven month superior price performance which should have helped Canola prices trade much higher than they did. Now, Canola’s opportunity is gone. Looking forward, the recent bear market in Bean Oil futures expressed in Canadian dollars could be tracing out an Elliott Wave 5 Count. If so, oilseed weakness may be nearly over. However, even if bottoming action is close at hand, it may take awhile to influence average delivered elevator prices for Canola. Granted, Basis levels are improving, but they are still far below last year and they usually slip lower during harvest. This explains why Canola’s seasonal tendency typically takes off about $0.50/bu between now and October 1st. Taken together, it always seems darkest before dawn.