ICE canola futures fell to fresh contract lows during the holiday-shortened week ended April 18, as bearish chart signals weighed on values and the trade dispute between Canada and China showed no signs of improving.
Heavy spread trade during the week saw traders roll out of the May contract and into July, which now holds the largest open interest. July canola finished the week at C$457.20 per tonne, with the C$450-per-tonne mark the next downside target as the May contract already fell below that level.
Agriculture and Agri-Food Canada released updated supply/demand estimates during the week, leaving the canola ending stocks forecast for 2018-19 unchanged at a record-large 3.500 million tonnes. However, the lack of progress on trade with China could see that number climb higher still, leaving little reason for canola bids to move higher.
Exports were running about 600,000 tonnes behind the year-ago pace in the latest weekly Canadian Grain Commission report, with producer deliveries into the commercial pipeline about a million tonnes behind the 2017-18 level.
Spring seeding will soon be in full swing across the Prairies, and the likelihood that some swing acres will move out of canola could provide some support. However, rotational issues and the lack of any standout alternatives to canola should result in only minor adjustments.
Statistics Canada’s first acreage estimates of the year were set to be released April 24, with pre-report expectations ranging anywhere from 19.5 million to 22.4 million acres. Canadian farmers seeded 22.8 million acres of canola in 2018.
In the United States, soybeans, corn, and wheat futures also trended lower during the week, hitting contract lows in wheat and testing the weakest levels in months in corn and soybeans.
While trade talks between the U.S. and China were making some headway, the continued lack of any concrete developments on that front kept some caution in the futures.
In addition, African swine fever has decimated China’s hog herd, which will cut into feed demand even if trade relations improve.
Seeding delays across parts of the U.S. Midwest made some headlines in the futures market, but farmers can make quick progress when the opportunity finally arises and adjustments in seeded area will likely be minor at best.
For wheat, rising production prospects out of Russia, favourable condition ratings for the U.S. crop, and expectations for an increase in Canadian spring wheat acres all weighed on prices during the week and should keep values under pressure going forward.