ICE Futures Canada canola contracts dropped hard during the week ended June 23, hitting some of their lowest levels in months.
The biggest losses were in the new-crop months, with improving crop weather and declines in the U.S. soy complex behind some of the selling pressure. The nearby July contract lagged to the downside, as tightening old-crop supplies provided some support and investors worked to exit the front month ahead of its expiry.
The tight old-crop supply situation means that any weather scare for the new crop could spark a rally. However, in the absence of such a catalyst, the trend appears to be pointed lower.
Statistics Canada releases updated acreage estimates on Thursday, June 29, while the U.S. Department of Agriculture will put out its own acreage numbers the following day, June 30.
Adjustments from the previous estimate are inevitable, but the extent of those adjustments could sway the nearby direction of the futures markets, especially as adverse spring weather in parts of the Prairies likely left some land unseeded.
For canola, trade estimates range from about 21 million to 22.7 million acres, with most analysts leaning toward the higher end of that range. After seeding 20.4 million acres last year, the likelihood of record-large canola area should be bearish on paper. However, yields are still very much in the air.
In the U.S., soybeans and corn were both lower on the week, as good Midwestern weather helped ease any nearby concerns for the developing crops.
Entering into the heat of summer, weather will be the key market moving factor over the next few months for the Chicago futures.
Wheat arguably saw the most excitement during the week, as the key spring wheat-growing regions of the U.S. in North Dakota and Montana continued to miss out on any significant precipitation.
Crop ratings for U.S. spring wheat declined to only 41 per cent good to excellent, as of June 18, and were expected to have worsened over the course of the week. Minneapolis futures continued their month-long rally, hitting fresh 2-1/2-year highs in the process. Chicago and Kansas City winter wheat futures were pulled higher as well, but the advancing harvest in the southern Plains did temper the gains.
With the run-up in Minneapolis spring wheat, the Canadian wheat acreage number from Statistics Canada will be closely watched by the global wheat trade. The spring wheat futures rally likely came too late to alter Canadian seeding plans. Average guesses are calling for a downward revision in the all-wheat number from the previous report.
Trade estimates place total Canadian wheat seedings at about 21.5 million to 23.2 million acres, which would compare with the 23.2 million seeded in 2016. Of that total, durum area is forecast to be down considerably on the year, with estimates ranging from about 4.9 million to 5.1 million. Canadian farmers seeded 6.2 million acres of durum the previous year.