ICE Futures canola contracts fell off of the top edge of their well-established trading range during the second week of October, but the losses were short lived with a number of underlying influences keeping the market well supported.
Traders were busy during the week, rolling their positions out of the nearby November contract and into January. That January contract settled at $915.70 per tonne on Oct. 8, marking the strongest close in the life of that contract after it hit a session high of $924.50 that day. However, when activity resumed after the Thanksgiving weekend, canola futures dropped sharply in sympathy with Chicago Board of Trade (CBOT) soybeans.
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The U.S. Department of Agriculture released a slew of bearish data on Oct. 14, pegging U.S. soybean yields above average trade guesses, at 51.5 bushels per acre, and nearly doubling its 2021-22 carry-out forecast to 320 million bushels. Bean futures fell hard in response to the data and canola followed suit.
However, while soybeans were crashing, Malaysian palm oil was rising to its strongest levels ever. European rapeseed and Chicago soyoil futures have also shown a fair bit of strength lately, with the mounting global energy crisis behind some of the gains in the vegoil sector.
Canola’s connection to biofuel is becoming a larger factor in the market, but this year’s tight supply situation should remain a primary bullish influence underneath the futures going forward.
That said, while tight supplies should help canola maintain a premium relative to other oilseeds, the current strength could be unsustainable. Crush margins have traded at negative levels relative to the futures for months now, implying that something will eventually need to give.
Soybean and corn futures in the U.S. may have both fallen sharply during the week on the back of a bearish USDA report and seasonal harvest pressure, but then clawed back most of those losses as the week progressed. Spring wheat futures, meanwhile, were a bright spot, climbing to contract highs.
World wheat stocks projections from USDA came in below average trade guesses, with production in a number of major countries revised down from earlier estimates.
USDA now estimates Canada’s 2021 wheat crop at only 21 million tonnes, which would be about 700,000 tonnes below the already small Statistics Canada projection. After growing 35.7 million tonnes in 2021, Canada is expected to be a much less significant player in the world export market in the current marketing year.
The December Minneapolis spring wheat contract was trading near US$9.75 per bushel on Oct. 15, marking the highest level for a front-month contract since 2012.
futures | Bearish data from USDA has knocked CBOT soybeans way down
