The ICE Futures canola market came under some pressure during the week ended Dec. 10, as speculators booked profits on their large net long positions and the months-long uptrend showed signs of faltering.
After a year of unprecedented strength all of the bullish news should be well known for canola. The tight supply situation was confirmed by Statistics Canada on Dec. 3 when its survey placed total production this year at only 12.6 million tonnes. After seeing total demand closer to 20 million tonnes in recent years, that’s a sizable chunk of rationing that needs to be done.
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From a technical standpoint, the January 2022 contract briefly traded below the psychological $1,000-per-tonne mark at one point during the week, but managed to hold above that key chart level for the most part. The more deferred months were softer, but even new-crop November 2022 canola at $760 per tonne would still have been considered unprecedented a short time ago — despite being $80 per tonne off its own highs.
The general sentiment amongst market participants seems to be that canola will need to stay at a premium to other oilseed markets going forward, due to its own supportive fundamentals. However, what that means in terms of actual price will depend on what happens in those outside markets.
The Chicago Board of Trade soy complex usually provides a major influence on canola, with Malaysian palm oil and European rapeseed futures also important markets to keep an eye on.
The U.S. Department of Agriculture released updated supply/demand estimates on Dec. 9 that elicited a largely neutral reaction in futures markets. The agency left its balance sheets relatively unchanged for U.S. corn and soybeans, with only minor adjustments to the world numbers.
Those world numbers could become more important going forward, with South American soybean crops still a few months away from harvest. Early expectations are for big crops out of Brazil and Argentina, but weather issues could easily develop.
Wheat futures in the U.S. were mixed during the week, with Minneapolis spring wheat holding rangebound while the winter wheats moved lower. The monthly USDA report did include some surprises as far as wheat was concerned, with both U.S. and world supplies topping average trade guesses.
However, while there may be plenty of wheat around, the quality of exportable supplies is thought to be questionable in a number of key growing areas, which was keeping Minneapolis spring wheat at a wide premium to the other wheats.
