LeftField Commodity Research, 52 Swiss Bay, Winnipeg, MB R2G 2P3 ph: fax:

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1 Canola & Soy Letter November, 2 Volume, Issue LeftField Commodity Research, Swiss Bay, Winnipeg, MB R2G 2P3 info@leftfieldcr.com ph: fax: Canola Canola futures have had a sharp run-up in the past two weeks, largely helped by a barfing Canadian dollar. The Jan contract has gained $. since last Wednesday and gains for October were $.9 per tonne. This move now has canola futures in an acceleration phase, and the next set of resistance for the Jan contract is at the August high of $3.8 with the July peak of $535 as the ultimate target. Support for the Jan contract is seen at the trendline around $55 per tonne. This week, the Jan/Mar spread widened by $.3 per tonne but remains at a neutral/bullish carry charge of $6.2 per tonne or 68% of full carry. Following the shift from old-crop to new-crop pricing, Australian canola prices had dipped slightly on harvest pressure but have already stabilized from those declines. That said, some of the recent price support has come from a weaker Australian dollar. The 2/8 Aussie canola crop was already expected roughly one-third smaller than last year and these firm prices suggest the harvest isn t providing positive yield surprises. Most analysts are forecasting total European rapeseed acreage for harvest will be very similar to the past year. There is some risk total acreage could end up smaller due to delays in Poland and northern Germany. If those acres do get planted and with an average yield, Europe would still need to import at least 3.5 mln tonnes in /9, similar to forecasts for the current year but below the 26/ record of. mln tonnes. Crush capacity utilization was lower than average early in 2/8 but has picked up considerably. Weekly volumes have averaged just shy of 2, tonnes the past four weeks and utilization has been 89%. The board crush index has gained roughly C$2 per tonne since the end of September but remains nearly C$5 per tonne below the highs in the first half of 26/. Even with this mediocre index, crushers aren t slowing the pace. This week s Vancouver canola basis is $23 per tonne over the Jan futures. That s weaker than the 5-year average of $3 but $3 per tonne better than last year s basis at this same time. It s worth noting that in 26/, basis started the year weaker than average and it wasn t until Q of the year that basis moved above the average. If the current strong pace of exports and crush continues, 2/8 basis could start to improve. That said, on The fine print: We do our best to provide accurate information in this newsletter but we don t guarantee its accuracy nor accept liability for any errors. This newsletter provides guidance but does not provide specific marketing recommendations. This material is intended for the clients of LeftField Commodity Research. We don t have a team of lawyers, but we simply ask that you don t forward it or copy it without asking us. It s our livelihood.

2 LeftField Canadian Oilseeds Letter November, 2 average, the Vancouver basis normally starts narrowing in the second half of the marketing year. Canola Bids & Basis: This week Last wk Wkly Min Max Avg Avg Chg Cdn Canola Bids (C$/bu del'd elev) Alta Sask Man Ont US Canola Bids (US$/cwt del'd elev) N Dakota Soybeans Now that soybean futures have come back off the USDAdriven high, the Jan contract has moved into a short-term sideways direction. This relative calm isn t expected to last however as US harvest results and unsettled Brazilian weather could add a lot more volatility. This week s sideways move brought the Jan contract to the uptrend line but the trend managed to hold for now. The gains that have occurred since mid-august have now brought the 5-day moving average back up through the -day MA, which could trigger more buying. For now, support on the Jan contract is at those MAs of $9. per bushel with resistance at nickel increments of $. and $.5 per bushel. For the week, the Jan soybean contract gained 5 cents and the Jan/Mar spread narrowed by ¼ of a cent and is now at a carry charge of ¼ cents per bushel or 62% of full carry. This week Last wk Wkly Min Max Avg Avg Chg Cdn Canola Basis (C$/t del'd elev) AB (Jan 8) SK (Jan 8) MB (Jan 8) ON (Jan 8) US Canola Basis (US$/cwt del'd elev) ND (Jan 8) Bottom line: Because the latest strength in canola futures is driven more by currency moves than fundamental market factors, the rally remains vulnerable to a correction on any kind of recovery in the loonie. That s not to say there aren t solid fundamentals underlying canola, but they don t justify this latest run-up. Unless the Canadian dollar continues to drop (and it looks like it s starting to stabilize), canola futures could turn sideways and once through the trendline, would be vulnerable to long liquidation. Longerterm outlook remains friendly despite the short-term risk. The pace of soybean exports has picked up sharply in the past three weeks with the seasonal peak just ahead. The.8 mln tonne (2%) increase in the 2 crop means a large boost is needed for exports to keep ending stocks from ballooning. We re forecasting 5.5 mln tonnes of 2/8 exports,.3 mln more than last year. In order to hit that total though, weekly licensed exports need to average 5-, tonnes per week. Page 2

3 LeftField Canadian Oilseeds Letter November, 2 Delays in planting the Brazilian soybean crop are the dominant feature in the short to medium-term outlook. The most recent estimates show Brazilian farmers have planted 3% of the expected acreage. That s behind last year s pace of % but still in line with the 5-year average of % complete. Soil moisture has improved in the south recently and has allowed average planting to occur there. The bigger problem is across central regions, but rain is forecast for the southern half of the country and that should allow improved soil moisture in the next days, as shown below. If that rain actually falls and the pace picks up, expect to see pressure on soybean futures. But if the rain is less or more isolated than expected, a bounce in futures is likely. staying in the range of bu/acre for the entire five year period, a highly unlikely outcome. Needless to say, these estimates need to be viewed with some healthy skepticism. Soybean Bids & Basis: This week Last wk Wkly Min Max Avg Avg Chg Cdn Soybean Bids (C$/bu del'd elev) Sask Man Ont US Soybean Bids (US$/bu del'd elev) N Dakota There s been discussion recently about Chinese policy changes that have discouraged corn plantings and boosted domestic soybean production. The chart below shows that the estimated.3 mln tonne (%) increase in the 2 soybean crop is still dwarfed by imports and crush that have been growing at roughly 5 mln tonnes per year. Of course, this also assumes the USDA carryover and production estimates are somewhat accurate and that s open to debate. Over the past five years, Chinese soybean yield estimates have been nearly unchanged, This week Last wk Wkly Min Max Avg Avg Chg Cdn Soybean Basis (C$/bu del'd elev) SK (Jan 8) MB (Jan 8) ON (Jan 8) US Soybean Basis (US$/bu del'd elev) ND (Jan 8) Bottom line: Soybean futures have turned sideways the past couple of weeks, but that doesn t mean the market is stable. Rather, it s in a waiting game to find out how South American planting shapes up, and that next event could happen soon. Further delays in Brazilian planting could easily push futures back up through $. per bushel while a quick catch-up for planting would wipe out the medium-term rally that s been in place since mid-august. The next USDA production and WASDE reports in a little over a week will also keep the market on edge. We re friendly to the soybean market longer-term, but there will be plenty of volatility in the short to medium-term. Page 3

4 ICE Canola Futures (C$/tonne) Futures Last Wkly Chg Contract Lo Contract Hi Open Int Spreads Last Wkly Chg % Carry Nov $5.6 $8.9 $.8 $ ,5 Nov /Jan 8 -$6.5 $.9 6% Jan 8 $. $. $6.2 $535.3,55 Jan 8/Mar 8 -$6.5 -$.3 68% Mar 8 $.6 $.3 $8.3 $5. 29, Mar 8/May 8 -$3.9 -$.3 38% May 8 $5.5 $8.6 $88. $5.9 8,35 May 8/Jul 8 -$2.5 -$.2 2% Jul 8 $5. $9.8 $5. $539. 3,68 Jul 8/Nov 8 $.2 -$2. % Nov 8 $55.8 $.8 $. $5.,53 CBoT Soybean Futures (US$/bu) Futures Last Wkly Chg Contract Lo Contract Hi Open Int Spreads Last Wkly Chg % Carry Nov $9.8 $.55 $8.5 $.3,6 Nov /Jan 8 -$. $.5 62% Jan 8 $9.9 $.5 $8.835 $.5 3,5 Jan 8/Mar 8 -$. $. 62% Mar 8 $.5 $.5 $8.9 $.55 2,5 Mar 8/May 8 -$.9 $.5 5% May 8 $.5 $. $8.9 $.53 2,8 May 8/Jul 8 -$.5 $.5 5% Jul 8 $.8 $.5 $9.26 $.55 86, Jul 8/Sep 8 $.9 $. 55% Sep 8 $.85 $.5 $8.9 $.35,653 Sep 8/Nov 8 $.85 $. 5% Nov 8 $. $.35 $8.65 $.5 5,2 Canadian Canola Supply & Disposition 2/3 3/ /5 5/6 6/ /8 Seeded Acres, 's,2 2,6 2,5 2,665 2,36,8 Harvested Acres, 's 2, 2,6 2,68 2,56 2,6,82 Yield (bu/acre) Supply (' tonnes) Carry-In 588 3,8 2,53 2,9,8 Production 3,869 8,55 6, 8, 9,6 9, Imports Total Supply,3 9, 9,5 2,55 2,8 2, Disposition (' tonnes) Crush 6, 6,99,36 8,5 9,9 9,5 Feed, Seed & Waste Exports,32 9,96 9,63,299,9, Total Disposition,5 6,9 6,92 8,96 2,6 9, Ending Stocks (Jul ) 588 3,8 2,53 2,9,8, Stocks/Use % 9% 5% % % % Source: Statistics Canada with LeftField projections in bold Canadian Soybean Supply & Disposition 2/3 3/ /5 5/6 6/ /8 Seeded Acres, 's,53,69 5,562 5, 5,,2 Harvested Acres, 's,,596 5,3 5, 5,385,25 Yield (bu/ac) Supply (' tonnes) Carry-In Production 5,86 5,359 6, 6,59 6,5, Imports Total Supply 5,55 5,86 6,6,236, 8,3 Disposition (' tonnes) Crush,5,5,8,923,832,9 Feed, Seed & Waste Exports 3,332 3,2 3,8,9,55 5, Total Disposition 5,8 5,6 6,6 6,856,55,8 Ending Stocks (Aug ) Stocks/Use 3% % % 6% 5% % Source: Statistics Canada with LeftField projections in bold US Canola Supply & Disposition 2/3 3/ /5 5/6 6/ /8 Seeded Acres, 's,65,8,53,, 2,6 Harvested Acres, 's,3,265,55,,686 2, Yield (bu/acre) Supply (' tonnes) Carry-In Production,8,,,36,,532 Imports Total Supply,55 2,2 2,,5 2,26 2,36 Disposition (' tonnes) Crush,266,689,,52 2,3 2, Other Domestic 2 35 () 3 Exports Total Disposition,,883,9,6 2,53 2, Ending Stocks (May ) Stocks/Use 5.5% 6.9% 5.%.% 5.% 3.% Source: USDA with LeftField projections in bold US Soybean Supply & Disposition 2/3 3/ /5 5/6 6/ /8 Seeded Acres, 's,2 6,8 83,3 82, 83,3 9,2 Harvested Acres, 's 6, 6,3 82,6 8, 82,36 89,5 Yield (bu/acre) Supply (' tonnes) Carry-In,6 3,8 2,5 5,88 5,35 8,6 Production 82,9 9,389 6,88 6,85 6,98 2,593 Imports,3, Total Supply 88,5 9,6,6 2,686,8 29,9 Disposition (' tonnes) Crush 5,96,92 5,95 5,335 5,5, Feed, Seed & Waste 2,583 2,8 3,98 3, 3,2 3,9 Exports 36,29,59 5,,86 59,5 62,5 Total Disposition 8,69 9,663 5,98,332,2 8, Ending Stocks (Aug ) 3,8 2,5 5,88 5,35 8,6,5 Stocks/Use 5% 3% 5% 5% 8% % Source: USDA with LeftField projections in bold

5 November, 2 This week Week Ago Wks Ago Year Ago Nearby Futures Basis ICE Canola C$/tonne Vancouver (ICE) C$/tonne Euronext Rapeseed /tonne Thunder Bay (ICE) C$/tonne Zhengzhou Rapeseed US$/tonne #VALUE! #N/A Avg Alta Canola C$/tonne Zhengzhou Rsd Meal US$/tonne #VALUE! #N/A Avg Sask Canola C$/tonne Zhengzhou Rsd Oil US$/tonne, #VALUE! #N/A Avg Man Canola C$/tonne CME Soybeans US$/bu Avg Ont Canola C$/tonne CME Soymeal US$/ton Avg N Dak Canola US$/tonne CME Soyoil US cents/lb Louisiana Soybean US$/bu Dalian Soybeans US$/tonne #VALUE! Minnesota Soybean US$/bu Dalian Soy Meal US$/tonne #VALUE! 8. Avg Sask Soybean C$/tonne Dalian Soy Oil US$/tonne #VALUE! 99. Avg Man Soybean C$/tonne Malaysian Palm Oil MYR/tonne 2,85 2, 2,683 2,32 Ch/Kent Soybean C$/tonne Avg N Dak Soybean US$/bu Ratios & Spreads Crush Margin Indices ICE Cnl - CME Soybean C$/tonne Board Canola (futures) C$/tonne ICE Cnl - Euronext Rsd C$/tonne (39.) (.2) (5.8) (68.56) Cash Canola C$/tonne ICE Cnl / CME SoyOil percent.5%.3% 5.%.9% Hamburg Rapeseed /tonne Soy Oil as % of Crush percent 35.8% 35.3%.5% 36.% Zhengzhou Rapeseed US$/tonne (9.) (2.2) #VALUE! - Board Soy (CME) US$/bu Cash Soy (Minnesota) US$/bu Dalian Soy (.66) (3.5) #VALUE! (29.6) Location Units Key Weekly Numbers Global Price Indications This week Week Ago Wks Ago Year Ago Location Units Canola/Rapeseed Soybeans Canada Canada Vancouver (ICE) C$/tonne Cdn Prairie Elev C$/tonne Thunder Bay (ICE) C$/tonne Ontario Elev C$/tonne Par Region (ICE) C$/tonne Bunge Hamilton C$/tonne #VALUE! #VALUE! #VALUE! 9.92 Cdn Prairie Elev C$/tonne US Cdn Prairie Crusher C$/tonne N Dakota Elev US$/tonne US Minnesota US$/tonne N Dak Elev US$/tonne Louisiana US$/tonne US Crusher US$/tonne International International Paranagua US$/tonne Hamburg /tonne Arg Up-River US$/tonne FOB Rouen /tonne FOB Ukraine /tonne Kwinana AU$/tonne China Index US$/tonne Kwinana GM AU$/tonne FOB Blk Sea US$/tonne This week This week Week Ago Week Ago Wks Ago Wks Ago Year Ago Year Ago Canola/Rapeseed Oil Soybean Oil Vancouver SD US$/tonne Decatur US cents/lb FOB Hamburg Refined /tonne, ,32.3 Minnesota US cents/lb EXM Netherlands /tonne FOB Rotterdam US$/tonne China Index US$/tonne,5.5,53.,8.5,.5 FOB Up-River Arg US$/tonne 95.5 NULL FOB Paranagua US$/tonne Canola/Rapeseed Meal China Index US$/tonne CPT Altona C$/tonne Soybean Meal CPT Central Alta C$/tonne California US$/tonne Altona C$/tonne PNW US$/tonne Hamilton C$/tonne FOB Hamburg /tonne California US$/ton FCA Antwerp /tonne PNW US$/ton FCA Rouen /tonne Minnesota US$/ton FOB Blk Sea US$/tonne NULL NULL NULL NULL NOLA US$/tonne China Index US$/tonne Ghent EXM HiPro /tonne FOB up-river Arg US$/tonne Currency China Index US$/tonne US$/Cdn$ US$/Euro US$/AU$ Data sources: ICE Canada, CME Group, MGEX, KCBT, LIFFE Euronext, StatsCan, USDA, CWB, Commodity3.com, TelventDTN,CFTC, MAFRI, Sask Ag Min, HGCA, Argentina AgMin, ProFarmer Australia, GFO, NNS, FranceAgriMer. 3

6 November, 2 CGC Weekly Handling Statistics Includes only bulk movement through licensed facilities (thousand tonnes) Grain Shipping Week: 2 Week ending: October, 2 Canola Soybeans Farm Deliveries Current Last week Year-to-date, Last YTD, Shipments Current.9. Last week 2..5 Year-to-date 2, Last YTD 2,3..9 Exports Current Last week 3..6 Year-to-date 2, Last YTD, Visible Stocks Primary Processor Terminal In-transit Total,55.,3.5 Last week total, Last yr total,589.,.6 Source: Canadian Grain Commission COPA Weekly Crush Statistics Marketing Week: 3 Week ending: October, 2 Canola Soybeans Crush ( tonnes) Current Percent of capacity 88.% 55.2% Last week Percent of capacity 8.3% 6.% Year-to-date 2, Last YTD 2,.5.9 Copyright 2 by LeftField Commodity Research

7 ICE Nearby Canola Futures Nearby Euronext Rapeseed Futures Euros per tonne US cents per bushel,,2,5,,5, CME Nearby Soybean Futures US$ per ton CME Nearby Soy Meal Futures CME Nearby Soy Oil Futures 3, Nearby Malaysian Palm Oil Futures US cents per bushel Ringgit per tonne 3,2 3, 2,8 2,6 2, 2,2 2, Average Canola Prices - Del'd Elev Average Soybean Bids Cdn Prairies US N Plains Ontario Cdn Prairies N Dakota Copyright 2 by LeftField Commodity Research 6

8 ICE Canola Track Basis Cdn$ per tonne Canadian Canola Basis Vancouver Thunder Bay Alta Sask Man US$ per bushel US Soybean Basis Soybean Basis Minneapolis NOLA Ontario Cdn Prairies N Dakota US$ per tonne Global Canola/Rapeseed Prices US$ per tonne Global Soybean Prices Vcr W Aust Blk Sea Rouen Hamburg NOLA Arg Up-Riv Paranagua China Ukraine US$ per tonne, Veg Oil Prices NW Europe US$ per cwt North American Veg Oil Prices Rapeseed oil Soybean oil Crude palm oil Canola (Vcr SD) Soy (Decatur Crude) Palm oil (Gulf RBD) Copyright 2 by LeftField Commodity Research

9 Canola Crush Indices US$ per bushel Soy Crush Indices Board Index Cash Index Board Index Cash Index US$ per tonne NW Europe Rapeseed Crush Index BO as percent of crush value 2% % 38% 36% % 32% 3% % 26% 2% Soy Oil Futures as Share of Crush Value Nearby Canola minus Soybean Futures ICE Canola minus Euronext Rapeseed Nearby Canola vs Soy Oil Futures Cdn cents per pound Nearby ICE Canola vs Palm Oil Futures 3,3 3, 2,9 2, 2,5 2,3 2,,9,,5 Ringgit per tonne Nearby canola (left) Nearby soy oil (right) Nearby canola (left) Nearby palm oil (right) Copyright 2 by LeftField Commodity Research 8

10 Canola - Commercial Stocks 2, Canadian Canola Farm Deliveries 2 8, 6, 5 5, 2,, 8, 6,, , Primary Term & transit Process 6/ Avg /8 26/ -Yr Avg 2,, Canadian Canola Exports, 9, 8, COPA Canola Crush 8, 6,, 2,, 6, 5,, 3, 2,, /8 26/ 5-Yr Avg /8 6/ 5-Yr Avg Soybean - Commercial Stocks Western Cdn Soybean Farm Deliveries *Primary & process elevators only in western region 2,,8,6,,2, Only includes farmer deliveries in the western region Primary Term & transit Process Avg 6/ 2/8 26/ -Yr Avg, 3,5 3, 2,5 2,,5, 5 Canadian Soybean Exports 2,,8,6,,2, Cumulative COPA Soybean Crush /8 26/ -Yr Avg 2/8 26/ 5-Yr Avg Copyright 2 by LeftField Commodity Research 9

11 Million tonnes Canadian Canola Production & Yield Bushels per acre, 2, 8, 6,, 2,, 8, 6,, 2, Canadian Canola Supplies Production (left) Yield (right) Carry-In Production Imports Canadian Canola Disposition 3,5 3, 2,5 2,,5, 5 Canadian Canola Ending Stocks % 2% 5% % 5% % Stocks as % of use Domestic Crush Exports Feed/waste Ending Stocks S/U Ratio Canadian Soybean Production & Yield Bushels per acre, 9, 8,, 6, 5,, 3, 2,, Canadian Soybean Supplies Production (left) Yield (right) Carry-In Production Imports 9, 8,, 6, 5,, 3, 2,, Canadian Soybean Disposition Canadian Soybean Ending Stocks 9% 8% % 6% 5% % 3% 2% % Stocks as % of use % Dom Crush Exports Feed/Seed/Waste Ending Stocks S/U Ratio Copyright 2 by LeftField Commodity Research