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Canola gets technical support against USDA production data

Crush margins have slipped to historically low levels

Canola gets technical support against USDA production data

The ICE Futures canola market suffered losses during the week ended Sept. 17, but the front-month November contract enjoyed some technical support, which allowed it to stay above the key $490-per-tonne mark.

The main item dominating the headlines was a bearish production report from the U.S. Department of Agriculture that weighed down oilseed markets in general. On Sept. 12 USDA released its estimates for U.S. farmers, pegging this year’s soybean crop at 4.7 billion bushels, which exceeded most analysts’ guesses. The agency also estimated yields at 52.8 bushels per acre.

The amount of ending stocks in the U.S. also surprised investors, which in turn weighed down oilseed markets. According to USDA, this year’s carry-out will be 845 million bushels, which greatly exceeded last month’s estimate of 785 million.

Uncertainty in canola yields across Canada threw an element of caution into the trade. Estimates of between 30 to 60 bushels an acre were common, with several participants saying it was hard to pin down exactly what the average will be.

Harvest in Alberta was stalled due to snow and cold temperatures. Some regions reported temperatures of -4 C or lower, which raised concerns about potential downgrading on the crop. Less than half the crop in the province has been harvested.

Crush margins remain abysmal, with values reaching some of their lowest levels in at least a decade. During the first week of September, domestic processors crushed just 140,000 tonnes of canola, about 35,000 tonnes off the average pace for 2018.

The attention has now shifted to a new crop production report on September 19, also compiled by Statistics Canada. The report differs from the traditional survey-based model as it is based on satellite imagery.

In the U.S., soybean futures dropped in the wake of the USDA report. The front-month November contract fell by nearly 14 U.S. cents, to US$8.305 per bushel. The damage could have been worse, but the market took strength from the unwinding of the corn/soybean spread. Prices also received a corrective bump as large funds went bargain hunting after the USDA report came out.

Corn futures also lost ground, falling roughly 15 U.S. cents to US$3.5175 in the December contract. The market was undermined by the USDA report, which put yields at 181.3 bushels an acre and total production at 14.8 billion bushels. Both totals surpassed analysts’ expectations.

Wheat futures ended relatively unchanged, despite several wild swings, with the December Chicago contract ending at US$5.115. USDA hiked its estimate for global ending stocks by 2.3 million tonnes, which had a mildly bearish effect on prices. On the other side, news that Russian wheat exports may slow down, due to new phytosanitary requirements, seemed to benefit U.S. exporters. The spring wheat harvest is nearing its end stages in many parts of the U.S.

About the author


Dave Sims

Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Dave has a deep background in the radio industry and is a graduate of the University of Winnipeg. He lives in Winnipeg with his wife and two beautiful children. His hobbies include reading, podcasting and following the Atlanta Braves.



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