ICE Futures Canada canola contracts dropped to their lowest levels in five months at one point during the week ended July 16, but managed to post small gains overall as traders continue to try and get a handle on the extent of the crop losses in Western Canada.
CNS — Declines in CBOT soybeans accounted for some spillover selling pressure in the Canadian futures, but canola held its own on the back of mounting concerns over the state of this year’s crop.
In addition to the unseeded, flooded out, and poor acres due to excessive moisture in Manitoba and Saskatchewan, the canola crops are also dealing with significant dryness in the Peace River district of Alberta, said Ken Ball, of PI Financial in Winnipeg. “The canola market is a little edgy and nervous,” he said adding that “commercials are being forced to take extra coverage ‘just in case.’”
He was uncertain how much more canola could gain relative to soybeans, as canola is starting to look more expensive and US soybean supplies are expected to be large. However, he said the Canadian futures would remain firm in comparison to beans “until the canola situation can be clarified a little bit.”
Ball said it was difficult to come up with a confident number on the size of the crop, with that uncertainty likely to persist until the Statistics Canada production report at the end of August.
Agriculture and Agri-Food Canada was forecasting a 14.750 million tonne canola crop for 2014/15 in their June report, which would compare with the record 17.960 million tonnes grown in 2013/14. Large carryout stocks should keep the total supply situation sufficient overall, but Ball said a production number below 14 million could make things start looking tight.
Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg-based crop reporting service