ICE Futures canola contracts hit their weakest levels in two months in early September but eventually managed to uncover support and move off those lows, despite ongoing seasonal harvest pressure.
Statistics Canada released its second model-based production estimates for the 2023-24 crop on Sept. 14, pegging the country’s canola production at 17.4 million tonnes. That was down by about 200,000 tonnes from August and well below the 18.7 million tonnes grown the previous year. It was also below the five-year average of 20 million tonnes.
Average pre-report trade estimates suggested a slight increase in production from August to 17.9 million tonnes. The final survey-based estimates won’t be released until December, leaving the trade somewhat skeptical of current numbers.
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The canola harvest is progressing, with anecdotal reports of relatively decent yields given adverse weather over parts of the growing season. From a seasonal standpoint, the harvest should limit the upside potential in canola for the next few weeks.
The move below $760 per tonne in the November contract was also bearish from a chart standpoint, with that level turning to nearby resistance. After that, the next major resistance comes in around $790 to $800, with support on the other side around the 100-day moving average near $742 per tonne. If the contract falls below that, a test of the psychological $700 per tonne level would be possible.
On the fundamental side, wide domestic crush margins should be somewhat supportive. However, the Canadian oilseed is trading well below both European rapeseed and U.S. soybeans in the export market.
Canadian canola exports are running ahead of the year-ago level so far, due to larger carry-in supplies, but that pace shows signs of slowing. The country only exported 22,700 tonnes of canola during the week ended Sept. 10, and hit a record low of only 1,200 tonnes two weeks prior.
The U.S. Department of Agriculture released its own updated supply/demand estimates during the week with a small cut to U.S. soybean production from earlier estimates but a surprising increase in the country’s corn crop. A sizeable bump in harvested area more than made up for a reduction in yields.
Initial reaction in the futures was bearish, although the underlying numbers were generally supportive for soybeans, with ending stocks expected to tighten to their lowest level in eight years by the end of the 2023-24 marketing year.
The USDA made only minor adjustments to its domestic wheat balance sheet, but a larger-than-expected seven-million-tonne cut to world wheat stocks helped the three U.S. wheat markets recover off nearby contract lows.
Canada, Australia, and Argentina – all major world wheat exporters – will have less wheat to move this year. India, a large wheat grower and one of the largest consumers, had a poor monsoon and tightness there shows signs of building.
