ICE Futures canola contracts moved lower during the first week of September, falling below psychological chart support as harvest operations progressed across the Prairies amid relatively favourable weather.
While there were many areas of concern during the growing season and the bulk of the canola harvest is still far from the bin, it’s fairly safe to say that production was considerably better than in 2021 when drought decimated the Prairies.
As a result, farmer selling is likely picking up while end-user demand on the other side may not be as aggressive as it was when supplies were tight.
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Bearish technical signals likely exaggerated the move lower, with stops hit on the way down as prices fell below psychological support. The nearby November contract flirted with the $800 per tonne level on several occasions over the summer, but finally moved decisively below that level on Sept. 7. A move to $750 could easily be in the cards, with $700 or even $650 not out of the question.
Spillover from outside markets could always come forward to take values back up again, but there is little in the way of canola-specific supportive fundamentals to warrant a rally at present. Statistics Canada did confirm the tight old-crop supply situation in a Sept. 7 report, showing ending stocks of 875,000 tonnes in the past crop year at roughly half of what was carried over from the previous year.
Another production report from the government agency on Sept. 14 will likely show a downward revision to the 2022-23 canola crop from the 19.5 million tonnes estimated at the end of August. But even then, the reduction is unlikely to be enough to give the market much of a boost, as the total crop will still be well above last year’s 13.8 million tonnes.
Overarching everything else are global recessionary/inflationary concerns that have roiled financial and energy markets as world central banks deal with the situation.
Renewed COVID-19 lockdown measures in China, and the resulting questions over demand from that country, are another factor to watch. The ongoing Russian invasion of Ukraine continues to make headlines as well, with comments from Russian President Vladimir Putin during the week raising concerns over whether Ukrainian grain exports will continue through the Black Sea.
In the United States, uncertainty over Ukrainian grain exports helped underpin wheat futures. Meanwhile, soybean and corn futures held rangebound, with the looming harvest keeping much of the attention in the futures markets on midwestern growing conditions. Updated supply/demand estimates from the U.S. Department of Agriculture on Sept. 12 are generally expected to show downward revisions to yields for both those crops.
