Initial Price action of US Grains showing price moves higher across the Board as Wheat takes leadership and China buying Beans on the dip this week.

Canola not really participating yet, likely because it was a Bearish report for Beans and High End Wheat. Canola is right at a very important Medium Term support line and should hopefully make a bounce here off this report. Otherwise it may take until spring to correct the chart damage done.

We should bounce here and will play the Fibonacci game for anyone who is behind on sales.

New Feature scheduled to be out Tuesdays shortly after Local Best Bids to  highlight when Deferred Delivery months are at a premium or a discount on Canola and hopefully one day Durum.  In the meantime, we will be doing a less busy version for Peas and Durum.

Below is a somewhat busy table that explains the current “Move” to date for the current marketing year – shaded in Purple.  It also has each closing bid for each delivery period for the 2012-13 marketing year – shaded in Blue.  Cost of Carry – shaded in Coral – is also calculated for each delivery period and factored in to the “Real” price – column in Green font.  The best “Real” price currently available is highlighted in yellow for both the 2012-13 and 2013-14 marketing year.  Last Week’s and Last Month’s “Real” price is there and also the High and the Low closing prices  for the year – used to calculate the current year’s “Move”.

A detailed explanation of how this is put together, why the table as a whole is important, and the assumptions we are making on Cost of Carry, will be the starting topic for our next monthly Marketing Meeting starting in November.  Call or reply next week with any questions in the meantime. 

FOB Assiniboia, SK (Except for Lentil/Chickpea FOB Farm, and Ethanol Wheat FOB Moose Jaw)

#1Canola:  Oct $13.10(31)   Jan $13.33(24)

#2Y.Pea:        Oct $8.02          Jan $8.26

#1Flax:          Oct $14.35        Jan $13.76

#2GrLentil:    Oct 20.5c

K.Chickpea:  Nov 35.5.0c

#FdWheat:    Oct $6.83

#2AD13.0:     Oct $8.00          Jan $8.35

#2HRS13.5:   Oct $7.85          Jan $7.98

FOB Assiniboia, SK (Except for Lentil/Chickpea FOB Farm, and Ethanol Wheat FOB Moose Jaw)

#1Canola:  Oct $13.46(32)   Jan $13.70(24)

#2Y.Pea:       Oct $8.13          Jan $8.33

#1Flax:         Oct $13.76         Jan $13.76

#2GrLentil:    Oct 21.0c

K.Chickpea:   Nov 35.5.0c

#FdWheat:    Sep $6.80

#2AD13.0:     Oct $7.98          Jan $8.28

#2HRS13.5:   Oct $7.67          Jan $7.79

One trading day later than expected, but it appears the Funds have indeed started to sell after the Low Yield confirmation of the latest USDA. Canola down 68c today.

Potential for a Turnaround Tuesday tomorrow, but as predicted last week, the confirmation of poor yields was a great sell signal and a mostly priced in Fed QE3 Announcement was icing on the cake for them to begin to unwind a fairly massive long near the highs of the year.

J-MAS remains Medium-Long term Bullish our own grains as Canola did breach the very important 52-week high barrier and Fundamentals are visibly Bullish for Canola to outperform Beans during this corrective period and springboard as Beans bottom. But it may not be sexy pricing for a few months.

The “Spreads locked out to July” play is also showing its Hedging nature as May/July dropped 4c less than the spot month, the type of daily outperformance we’ll see if things go sour and the Inverted market unwinds (as it eventually should – if not, it means we are headed to $16 Canola).

Demand that was starting to slacken slightly should re-enter the market and in the Long Term, a correction should be positive for maintaining a tight S&D into 2013 as China buys the dip.

If not, that is why we are 55% sold Canola and no less than 40% sold anything but Flax. Remember – Fund sellers now become potential buyers again later, but you need to be sold to a position that keeps you from panicing into one of their traps.

Chickpea Sales should be pushed forward to 100% as you wrap that harvest as well.

reprinted with permission:

With a breach seemingly confirmed, Canola looks poised to leg higher on both strong Technicals and Fundamentals, with an increasingly small Canadian crop the new catalyst. 

To temper our exceptions though is the fact Beans and Corn are not making – nor even challenging – New Highs.  Wheat however has broken out of a Pennant to the upside and we believe will start to challenge its 52-week high in short order.

It will be an interesting Canadian Acre battle next year with Durum and Lentils poised to lose it, making them great Contrarian plays for next year along with Canola as staples but Canola should not to be over-weighted (above 33%) on our farms (in SW Sask) due to the potential for a dry year ahead.

Bernanke just left the stage and left us with a very well timed announcement for Canola (and all commodities in general) as it was near Resistance at 52-week high territory already and this has pushed it through in the last 60 minutes.

With possibly another 1bu shaved off the national Canola average due to massive wind damage over last 3 days in the north also adding support, we watch closely for a close above 645 on the Nov (currently 647) and a hold of that level tomorrow. If so, we will be considering new targets near or above $15/bu and believe that $16 is in play at some point down the road.

NOTE – Beans/Corn have not responded today to the Fed news while Oil and the S&P have significantly along with Canola. It may mean some Fund money is shifting out of an already profitable Long and into the Energy sector which has a lot of upside potential. Not necessarily Bearish, especially over the Medium-Long term but could spark a few weeks of profit taking in the US Grains as we feared ahead of the USDA and this partially priced QE3 move.

US Production: Neutral Corn, Neutral-Bullish Bean, Neutral Wheat

US Stocks: Neutral Corn, Neutral Bean, Neutral Wheat

Early Price Action: Bearish Corn, Bullish Bean, Bearish Wheat, Bullish Canola

Closing Price Action: 

Neutral Corn – closed lower but on a continuation of a previous downtrend and on mildly Bearish news.

Neutral Beans – closed higher but on mildly Bullish news and not above any significant resistance levels.

Neutral-Bullish Wheat – closed higher on neutral news but not above any significant resistance levels – pennant forming.

Bullish Canola – closed much higher on mildly Bullish Bean news but only up to a resistance level so far.

2-Day Price Action: coming tomorrow with more commentary on the sales plan going forward.