It was a bumpy ride for the ICE Futures Canada canola market during the week ended July 6. The aftermath of a bearish acreage report by Statistics Canada on June 29 gave way to trepidation on Friday, when Chinese tariffs on U.S. soybeans finally kicked in.
Traders sold off contracts in the days leading up to the July 6 deadline, which sent soybeans tumbling. However, that all changed on Friday when the market realized the fears were already baked into the price and there were serious bargains to be had. As a result, both soybeans and soyoil jumped on the day and canola hung on for the ride, resulting in a weekly gain of $1.80 per tonne for the November canola contract.
The climb by U.S. soy helped alleviate some of the pressure canola was feeling over the past week. Many traders remarked it was simply too expensive compared to U.S. soybeans and a breaking point was near. There were also ideas that expectations for increased Chinese buying were slightly overdone. Ideas took hold that the five Asian countries which recently had Chinese tariffs against them removed will simply buy cheap soybeans from the U.S. and sell them back to China. There’s also some expectation that crushers in Ontario may do the same thing. Canola is also lacking some of the high protein content found in soybeans, which China has stated numerous times it wants for its citizens.
Excessive heat could also affect prices for Canadian canola as sweltering temperatures over July 7-8 only added to dryness concerns in Saskatchewan and Manitoba. Already, it is hard to imagine there will be a lot of fields in the 70-bushel-an-acre range.
In the U.S., soybean futures gained on the week, with the dominant November Chicago contract rising 14 U.S. cents to US$8.775 per bushel. The market gained 38 U.S. cents on Friday, though, as ideas took hold the market was oversold. While the crop in the U.S. has generally advanced ahead of schedule, there are still concerns over excess moisture in the eastern U.S. Plains and dryness in the west.
Corn futures were relatively unchanged over the week, albeit with some choppy action throughout. The removal of Scott Pruitt as head of the U.S. Environmental Assessment Agency may have been the most profound event to hit agricultural markets in the past few weeks. Pruitt, as EPA administrator, continually fought against the Renewable Fuel Standard, which compels oil refiners to use plant-based fuels in gasoline. Andrew Wheeler, a former coal lobbyist, was named as his successor. While there is a chance he may continue his predecessor’s efforts to weaken the RFS, there are ideas he is less opposed to its existence.
Chicago wheat futures strengthened by 14 U.S. cents per bushel over the week. The market was boosted by the International Grains Council’s lowering of its estimate for world wheat production. The IGC pegged production at 737 million tonnes, down five million from last month’s estimate. Weather problems in Russia and parts of Europe are cited as some of the main reasons for the shortfall. Closer to home, heavy rains in Nebraska, slowing down the harvest, were supportive.