There isn’t much to be overly concerned about now regarding canola futures on the intercontinental exchange. Despite declines, the Canadian oilseed remained a fair bit higher than a week ago.
This is pleasant news, given how canola has tumbled downward in recent months. In short, canola can be seen as rangebound.
There is a deficit of bullish news to drive canola much higher. However, one future upward driver could be soil moisture levels across the Prairies come spring. The region still remains quite dry, and lack of snow cover hasn’t helped. Even the outlook calling for normal levels of precipitation into May might not be sufficient.
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Until then, an upward push could come from the usual spring rally, but how much ‘oomph’ that would have remains to be seen.
Nevertheless, the nearby May canola contract has gained $17.80 per tonne since March 7, closing March 14 at $623.20. New crop November added $22.30, settling that day at $641.60/tonne.
Prairie cash prices provided by Price and Data Quotes ranged from $585.63 to $604.09/tonne as of March 14. A week ago, they were $567.13 to $588.17/tonne. That was good incentive for farmer selling because they still hold a pretty good amount of those tiny black seeds in their grain bins. The only problem is, when prices rise to entice growers to sell, the price then often turns back.
A major factor that pulled canola prices lower until recently was a huge influx of South American soybeans coming on the market. Although Brazil won’t harvest anything near the hoped-for plus-160-million-tonne crop, it still has plenty coming off the fields. Added to the mix has been the Argentina harvest, which will easily exceed 50 million tonnes.
It’s believed that by now, the bulk of those South American soybeans are accounted for and the market pressure they created should soon subside.
Canola received some support from another round of rumours that China bought large quantities. The latest unconfirmed reports placed those purchases at around 600,000 tonnes. It remains to be seen whether any indication of that sale turns up in future reports from the Canadian Grain Commission. Scuttlebutt about sales in December and January have to be verified.
On another China note, in the last couple of weeks it has ruffled quite a few feathers in the global wheat market. Not only did the import-hungry country cancel a hefty amount of red winter wheat sales from the United States, but it also halted purchases from France and Australia. Reports said upwards of one million tonnes from Australia were cancelled.
China may be switching to Russian wheat, which is currently the cheapest on the world market, or it may have overestimated how much imported wheat it required. Either way, the cancelations played a big role in driving down global wheat prices.
