After grinding higher for most of the past month, the ICE Futures canola market ran into resistance and took back a large portion of those gains during the week ended May 22.
The July contract traded just below resistance around the 100-day moving average, near $475 per tonne, for a number of days before finally running out of steam and dropping back down to its 20-day moving average of $467 per tonne.
A downturn in Chicago Board of Trade soybeans and soyoil likely triggered the sell-off in canola, although the Canadian oilseed remains rangebound and trading in a sideways pattern overall.
While the COVID-19 pandemic remains the overarching feature in the background of all markets, the usual supply/demand fundamentals have not been totally forgotten.
For canola, demand remains relatively favourable, with both exports and domestic crusher demand running ahead of the year-ago pace. The latest weekly data from the Canadian Grain Commission showed a slowdown on both fronts.
Canada has exported 7.8 million tonnes of canola during the crop year to date, up by about half a million tonnes compared to the same time a year ago. Domestic usage, at 8.3 million tonnes, is up by 900,000 tonnes on the year.
However, even with that good demand, carry-out stocks are still forecast to be rather large — in the three-million-tonne range — with early forecasts pointing to another sizable crop in 2020.
Manitoba and Saskatchewan farmers likely made good progress with seeding the 2020 crop and bringing in the last of the 2019 harvest during the week, although rain slowed the progress there.
Farmers in the United States also made headway planting soybeans and corn, with only spring wheat going in a bit later than normal in the country.
Soybeans and corn at the Chicago Board of Trade both drifted lower during the week, while wheat saw some brief gains before giving most of them back.
Tensions between the U.S. and China kept agricultural markets on edge, as they have for many months now. The latest developments have raised some questions over just how much China will actually buy from the U.S. under the Phase 1 trade deal, especially as cheaper South American supplies are available.
Wheat traders have their eyes on a number of major growing regions, with dryness in Europe and the Black Sea region a potentially supportive influence.