ICE Futures Canada canola contracts fell hard over the course of the week ended June 2, as fund selling and losses in Chicago soybeans weighed on values.
Speculators bailing out of long positions and putting on short positions in some cases were a feature of the activity during the week, with chart stops hit on the way down.
The declines came despite persistent weather concerns in parts of Western Canada, as rains in northern Alberta continue to cause problems with spring seeding and dryness to the south has many fields in need of moisture. While Statistics Canada forecast canola seedings this spring at a record 22.4 million acres, that number is looking more and more unlikely, while yields for what was seeded are already being questioned due to the poor weather.
Visible canola supplies in the country fell to their tightest level in nearly three years, hitting 702,700 tonnes in the latest weekly Canadian Grain Commission report. Export demand does typically slow down at this time of year, as attention turns to the new crop, but the domestic crush is still running strong and some demand will need to be rationed or the market will run out of canola before the new crop is available.
While the fundamentals for canola are shaping up to be relatively supportive from a pricing standpoint, the situation is the complete opposite for soybeans in the U.S.
The window for planting corn in the U.S. Midwest is quickly closing, but there is still time to get more soybeans in the ground. With wet weather causing delays for the final 10 per cent of intended corn acres in the U.S., some of that area will go into soybeans instead and the possibility of a very large U.S. crop is weighing on prices.
Bearish chart signals added to the declines, as beans fell to their lowest levels in 14 months during the week. While oversold price sentiment may slow the downward move, the overall trend remains pointed lower, with US$9 per bushel the next major support for soybeans.
Meanwhile, the grains found some support during the week. The lost corn acres kept that market well supported while quality issues propped up wheat.
Minneapolis spring wheat saw the most strength, widening its premium over Kansas City and Chicago winter wheats.
The U.S. winter wheat harvest is underway in the southern states, and early results point to lower-than-normal protein levels. Concerns over protein levels give the Minneapolis market a boost, as the contract specs are for higher-protein wheat.
Weather forecasts calling for hot and dry weather in the key U.S. spring wheat-growing regions added to strength in the Minneapolis futures, as the yields and quality of the spring wheat are starting to be questioned.