Chart analysis and commentary by Harold AGJ DavisNovember 18, 2011Special Study: Influence of BordersThe influence of an international border These charts compare US commodity prices expressed in Canadian dollars to the average delivered elevator prices of Canadian counterparts. Note that commodities which enjoy free trade across an open border show tight US-Canada price relationships. On the other hand, commodities that are subject to trade barriers tend to show much looser price relationships.Privacy Policy Information is secured from sources believed to be reliable, but 100% accuracy cannot be guaranteed. For analytical purposes, some price data for illiquid markets may be interpolated. Persons associated with Canadagrain.com deal commercially with businesses active in Prairie grain markets and may hold positions on their own accounts in commodities discussed herein. Prairie Crop Charts does not provide specific marketing advice or advice on trading opinions on futures and option contracts.Canadagrain.com, 958 – 167 Lombard Ave., Winnipeg, MB R3B 0V3, tel: (204) 942-1459 fax: (204) 942-7652Site design & maintenance by Branscombe ConsultingCopyright 2012 CanadagrainCopyright 2012 Canadagrain.comReproduction and/or redistribution without permission are prohibited.MobileChart analysis and commentary by Harold AGJ DavisNovember 18, 2011Special Study: International Edible OilInternational Edible Oil Comparison Canola’s closest trading relationship is with Bean Oil. Despite the fact that Canola has a meal component not found in Bean Oil, Canola’s price moves more closely resemble Chicago Bean Oil Futures than MATIF (European) Rapeseed. Palm Oil enjoys the least correlation, but is still a factor worth monitoring.
Chart analysis and commentary by Harold AGJ DavisExchange rate woes make foreign buyers cautious It is always difficult for Prairie sellers to assess the variables driving foreign demand for our crops. In the case of Lentils and Peas, India is a big customer that often comes to Canada when domestic supplies are inadequate or comparatively expensive. At present, India’s winter crops are progressing towards their February-March harvest against a background of adequate near term local supplies. So, Indian importers are probably not in any particular hurry. However, if they were, the recent weakness of the Indian Rupee on global foreign exchange markets would be problematic for pricing. The Rupee has had a sharp sell-offthat dropped its value by about 16% against the US dollar in the last four months. From an Indian buyer’s point of view and assuming broadly stable Indian prices, Lentil and Pea prices expressed in Canadian dollars would have to drop by about 13% to be competitive. Moreover, looking forward, any chart that shows major support being tested is trading defensively and further weakness can not be ruled out. Let’s hope it holds.Chart analysis and commentary by Harold AGJ DavisGlobal freight rates: Indicating a bottom?The Baltic Dry Index measures the cost of cargo space in dry bulk freighters on twenty-six shipping routes around the world. It is not limited to the Baltic Sea, rather it takes it name from the old Baltic Exchange. Dry bulk freighters carry a range of commodities and raw materials such as iron ore, coal and grains and, therefore, this index is often interpreted as a sensitive indicator of global economic activity. For Prairie farmers, freight costs are important because foreign importers often consider what they want or can afford to pay in terms of the “all in” costs to their home port destination. This means that Canadian exporters have to deduct freight and handling costs from that “all in” final price to determine what they can bid for supplies at the source here on the Prairies. Baltic rates look comparatively low and less volatile than two years ago, but they seem to be tracing out a big bottom. To the extent that improvement reflects recovery in global economic activity, foreign buyers might have more income to spend on Prairie crops in the year ahead.Chart analysis and commentary by Harold AGJ DavisThe Chinese Yuan: What is Beijing doing?China has the most mouths to feed of any country in the world and, therefore, is directly or indirectly key to any demand projections for Prairie crops. As a managed economy, the value of its currency often reflects Chinese government policy more than simple free market supply and demand. This makes forecasting more difficult, but the chart still shows us that something is happening. The latest phaseof the Yuan’s rise against the US dollar has had trouble maintaining a close uptrend and, in fact, the Yuan has been in a sideways trading range since mid-August. At present, the Yuan is testing the top of this range and should be watched closely for a possible breakout. A resumption of the Yuan’s gains would be beneficial for North American agricultural product pricing because Chinese importers could acquire more of our commodities for the same amount of Yuan.Chart analysis and commentary by Harold AGJ DavisThe Loonie: Stability may be coming to an endThe Canadian dollar has not been much of a factor in Prairie crop pricing in recent months, but one evolving chart formation suggests that could soon change. The sideways trading range is evolving into a potential pennant formation. This deserves close attention because an exit or breakout from the boundaries of a pennant can be a sign that a new directional consensus has been reached. The converging lines of a pennant are thought to represent both aggressive buying and selling, but eventually one side or the other runs out of steam or is simply overpowered by the opposite camp. This leaves price determination temporarily in the hands of just one side of the market, and the result is often a volatile thrust or “leg”. It is important to keep an open mind about the leg’s possible direction, up or down. The current uptrend is the third since early 2009 and may indicate that the big bull is tired. On the other hand, Canada, with all its problems, still seems to be a zone of sanity in an unstable world. Whatever fundamental argument is ultimately associated with resurging volatility, a change in the value of the Loonie of several percent could have an impact on our agricultural prices in the weeks and months ahead.Chart analysis and commentary by Harold AGJ DavisThe US dollar: A depressing influenceMuch can be said about global commodity supply/demand numbers, but price graphs can tell a different story. For example, there is now a convincing chart argument that the real factor depressing Chicago Corn prices is the strong US dollar, not the latest USDA statistics. A comparison of major global Corn prices shows that all offshore markets have been strengthening for weeks, including MATIF prices. The clear exception is Chicago where CBOT Corn prices have already retraced a large portion of their recent improvement. Chicago’s recent bout of weakness comes at precisely the same time that the European debt crisis caused the Euro currency’s exchange rate to plunge through the psychologically important US$1.30 level and threaten further losses. Given that Euro weakness is the same as US dollar strength, this has made CBOT Corn more expensive to foreign buyers thereby causing the commodity’s price to drop. The US dollar’s strength may continue to depress CBOT Corn awhile longer and this downward pressure could spill over into Canadian feed grain values. However, it may be worthwhile to remember that the global Corn picture does not look nearly as bad and, after more than seven months of retreat, additional CBOT weakness may be comparatively short-lived.Chart analysis and commentary by Harold AGJ DavisGlobal Wheat Markets: Starting to float upThere is an old market adage that ”A change in the tide moves all boats.” In the case of global Wheat prices, a good number of major markets seem to be turning upwards together. Strength in the leaders usually spills over into the laggards, and that is good news for Canadian Wheat growers!Chart analysis and commentary by Harold AGJ DavisVarieties and protein levels are important!As Prairie farmers start watching wheat prices, it is important to remember that wheat pricing is more complicated than it is for other crops like Canola. Not only are there big price differences between grades, but varieties and protein levels matter too. By way of illustration, in the US Wheat market, varieties and protein differences command important price differences. When viewing this chart, please note that all prices have been converted to Canadian dollars per bushel to make your local comparisons easier. Minneapolis Futures call for #2 or better Hard Red Spring Wheat with a protein content of 13.5% or higher. In contrast, the Kansas City Futures deliverable grade is #2 Hard Red Winter Wheat with 11% protein. The average delivered elevator price for North Dakota DNS tends to trade like Minneapolis Futures whereas Montana HRW trades closer to Kansas City Futures. So, depending upon what you will be growing, remember to watch the right leader.
Chart analysis and commentary by Harold AGJ Davis
November 18, 2011
Special Study: Influence of Borders
The influence of an international border
These charts compare US commodity prices expressed in
Canadian dollars to the average delivered elevator prices of
Canadian counterparts. Note that commodities which enjoy
free trade across an open border show tight US-Canada price
relationships. On the other hand, commodities that are subject
to trade barriers tend to show much looser price relationships.
Privacy Policy
Information is secured from sources believed to be reliable, but 100% accuracy cannot be guaranteed. For analytical purposes, some price data for illiquid
markets may be interpolated.
Persons associated with Canadagrain.com deal commercially with businesses active in Prairie grain markets and may hold positions on their own accounts in
commodities discussed herein.
Prairie Crop Charts does not provide specific marketing advice or advice on trading opinions on futures and option contracts.
Canadagrain.com, 958 – 167 Lombard Ave., Winnipeg, MB R3B 0V3, tel: (204) 942-1459 fax: (204) 942-7652
Site design & maintenance by Branscombe Consulting
Copyright 2012 Canadagrain
Copyright 2012 Canadagrain.com
Reproduction and/or redistribution without permission are prohibited.
Mobile
International Edible Oil Comparison
Canola’s closest trading relationship is with Bean Oil. Despite
the fact that Canola has a meal component not found in Bean
Oil, Canola’s price moves more closely resemble Chicago Bean
Oil Futures than MATIF (European) Rapeseed. Palm Oil enjoys
the least correlation, but is still a factor worth monitoring.
Chart analysis and commentary by Harold AGJ Davis
Global freight rates: Indicating a bottom?
The Baltic Dry Index measures the cost of cargo space in dry
bulk freighters on twenty-six shipping routes around the world.
It is not limited to the Baltic Sea, rather it takes it name from
the old Baltic Exchange. Dry bulk freighters carry a range of
commodities and raw materials such as iron ore, coal and
grains and, therefore, this index is often interpreted as a
sensitive indicator of global economic activity.
For Prairie farmers, freight costs are important because
foreign importers often consider what they want or can afford
to pay in terms of the “all in” costs to their home port
destination. This means that Canadian exporters have to
deduct freight and handling costs from that “all in” final price
to determine what they can bid for supplies at the source here
on the Prairies.
Baltic rates look comparatively low and less volatile than two
years ago, but they seem to be tracing out a big bottom. To
the extent that improvement reflects recovery in global
economic activity, foreign buyers might have more income to
spend on Prairie crops in the year ahead.
Chart analysis and commentary by Harold AGJ Davis
The Chinese Yuan: What is Beijing doing?
China has the most mouths to feed of any country in the
world and, therefore, is directly or indirectly key to any
demand projections for Prairie crops. As a managed economy,
the value of its currency often reflects Chinese government
policy more than simple free market supply and demand. This
makes forecasting more difficult, but the chart still shows us
that something is happening.
The latest phase of the Yuan’s rise against the US dollar has
had trouble maintaining a close uptrend and, in fact, the Yuan
has been in a sideways trading range since mid-August. At
present, the Yuan is testing the top of this range and should be
watched closely for a possible breakout.
A resumption of the Yuan’s gains would be beneficial for
North American agricultural product pricing because Chinese
importers could acquire more of our commodities for the same
amount of Yuan.
Chart analysis and commentary by Harold AGJ Davis
The Loonie: Stability may be coming to an end
The Canadian dollar has not been much of a factor in Prairie
crop pricing in recent months, but one evolving chart formation
suggests that could soon change.
The sideways trading range is evolving into a potential
pennant formation. This deserves close attention because an
exit or breakout from the boundaries of a pennant can be a
sign that a new directional consensus has been reached.
The converging lines of a pennant are thought to represent
both aggressive buying and selling, but eventually one side or
the other runs out of steam or is simply overpowered by the
opposite camp. This leaves price determination temporarily in
the hands of just one side of the market, and the result is
often a volatile thrust or “leg”.
It is important to keep an open mind about the leg’s possible
direction, up or down. The current uptrend is the third since
early 2009 and may indicate that the big bull is tired. On the
other hand, Canada, with all its problems, still seems to be a
zone of sanity in an unstable world.
Whatever fundamental argument is ultimately associated with
resurging volatility, a change in the value of the Loonie of
several percent could have an impact on our agricultural prices
in the weeks and months ahead.
Chart analysis and commentary by Harold AGJ Davis
The US dollar: A depressing influence
Much can be said about global commodity supply/demand
numbers, but price graphs can tell a different story. For
example, there is now a convincing chart argument that the
real factor depressing Chicago Corn prices is the strong US
dollar, not the latest USDA statistics.
A comparison of major global Corn prices shows that all
offshore markets have been strengthening for weeks, including
MATIF prices. The clear exception is Chicago where CBOT Corn
prices have already retraced a large portion of their recent
improvement.
Chicago’s recent bout of weakness comes at precisely the
same time that the European debt crisis caused the Euro
currency’s exchange rate to plunge through the psychologically
important US$1.30 level and threaten further losses. Given
that Euro weakness is the same as US dollar strength, this has
made CBOT Corn more expensive to foreign buyers thereby
causing the commodity’s price to drop.
The US dollar’s strength may continue to depress CBOT Corn
awhile longer and this downward pressure could spill over into
Canadian feed grain values. However, it may be worthwhile to
remember that the global Corn picture does not look nearly as
bad and, after more than seven months of retreat, additional
CBOT weakness may be comparatively short-lived.
Chart analysis and commentary by Harold AGJ Davis
Global Wheat Markets: Starting to float up
There is an old market adage that ”A change in the tide
moves all boats.” In the case of global Wheat prices, a good
number of major markets seem to be turning upwards
together. Strength in the leaders usually spills over into the
laggards, and that is good news for Canadian Wheat growers!
Chart analysis and commentary by Harold AGJ Davis
Varieties and protein levels are important!
As Prairie farmers start watching wheat prices, it is important
to remember that wheat pricing is more complicated than it is
for other crops like Canola. Not only are there big price
differences between grades, but varieties and protein levels
matter too.
By way of illustration, in the US Wheat market, varieties and
protein differences command important price differences.
When viewing this chart, please note that all prices have been
converted to Canadian dollars per bushel to make your local
comparisons easier.
Minneapolis Futures call for #2 or better Hard Red Spring
Wheat with a protein content of 13.5% or higher. In contrast,
the Kansas City Futures deliverable grade is #2 Hard Red
Winter Wheat with 11% protein.
The average delivered elevator price for North Dakota DNS
tends to trade like Minneapolis Futures whereas Montana HRW
trades closer to Kansas City Futures. So, depending upon what
you will be growing, remember to watch the right leader.
