Canola futures hit some of their lowest and highest levels of the past month during the week ended Jan. 19, with the end result being a continuation of a rather choppy and sideways pattern.
Canola finished the week on a high note, but there’s more bearish news than bullish in the background for now. Large net fund short positions, relatively soft crush margins, and ample old-crop supplies should all keep a lid on any potential rallies barring an outside catalyst.
While the jury is still out on the veracity of Statistics Canada’s record-large 2017-18 canola crop estimate, the large official number has brought some complacency into the market, with little concern from end-users over running out of stocks before next year’s crop is available.
While that 2018 crop is still a long ways off from even being seeded, the early money is on an increase in canola acres in Western Canada. While prices may not be all that great, the lost pulse acres will go somewhere and canola should still deliver decent returns.
In the meantime, while the futures market is looking sluggish, basis opportunities should pop up from time to time.
News that Richardson International would no longer be providing funding to the Canola Council of Canada did little from a marketing standpoint, but could create some ripples down the road. The company contributed an estimated $1 million to the council on an annual basis, with that loss likely cutting into some of the research and promotional efforts of the organization.
The question now is whether or not Richardson’s move will have a domino effect on other commercial players. Ultimately, a shift to an amalgamation of individual commodity groups is likely, but what will actually take place remains to be seen.
In the U.S., soybeans spent the week seeing some follow-through buying interest after jumping higher in response to the U.S. Department of Agriculture’s latest supply/demand estimates, released Jan. 12.
Shifting weather forecasts out of Argentina that heightened concerns over hot and dry conditions for soybeans in the country were also supportive, although the crops are a far cry from being written off and conditions are generally decent in Brazil where the harvest is just getting started.
Corn futures moved up as well, but remain stuck in a fairly sideways trading pattern.
Wheat spent the week clawing back some ground after dropping sharply following USDA’s larger-than-expected winter wheat acreage estimate. While above expectations, the acreage base would still be the smallest in more than 100 years.