Canola futures moved steadily higher over the course of the week ended April 6, with new-crop November hitting fresh contract highs and the front months reaching their best levels in more than four months.
The gains in canola came despite, or possibly because of, a choppy week in the Chicago soy complex. Heightening trade tensions between China and the U.S. saw both countries propose tariffs on billions of dollars’ worth of products, with soybeans prominent on the list. China is a fairly major buyer of U.S. soybeans — and while the trade war is still confined to the sphere of words, the threat was enough to keep the overall bias lower in the U.S. futures.
What a China/U.S. trade war means for Canada remains to be seen, with any number of scenarios possibly playing out going forward. One general take-away is that any problems the U.S. runs into selling soybeans to China could open the door for some more Canadian canola business. Prices at the West Coast were reportedly rising during the week, but the ongoing logistics issues across the Prairies will likely limit how much extra canola business really materializes.
Total canola exports during the crop year to date of about 6.9 million tonnes are running behind the previous year’s pace by about 400,000 tonnes, despite starting the marketing season with a larger supply base.
Independent strength in canola was also making it look more expensive compared to other competing oilseeds, with advances in the Canadian dollar during the week not helping matters. The currency increased by about three-quarters of a cent during the week. Nearby crush margins lost about $20 per tonne as a result, cutting into the profitability for domestic processors and export customers.
Unseasonably cold temperatures across Western Canada and into the U.S. underpinned grains and oilseeds during the week, with the persistent winter weather raising concerns over seeding delays. Minneapolis spring wheat futures were up sharply amid the seeding delay concerns. Kansas City hard red winter wheat contracts posted even larger gains, as the cold was also stressing crops in southern areas already dealing with a lack of moisture.
Earlier in the winter, expectations had been for increases in both wheat and canola acres on the Canadian Prairies this spring, but intentions for some swing acres may be shifting to other options as the winter holds on.
Soybean and corn futures in Chicago should keep some attention on the South American situation going forward, although the dryness in Argentina and harvest delays in Brazil may take a back seat to the closer-to-home trade uncertainty and spring seeding issues.