Canola contracts continued to chop around the $525- to $535-per-tonne range during the week ended May 11, despite some recent government reports that were deemed bullish for the market.
The U.S. Department of Agriculture on May 10 released its monthly supply and demand report, in which it lowered its estimate of the ending stocks for new-crop and old-crop soybeans. The prognosis temporarily lifted oilseed futures both north and south of the border but traders stepped in and took profits, which capped the gains.
Statistics Canada on May 11 released its stocks numbers, which confirmed this year’s carry-out would be extremely large. The agency pegged canola stockpiles, as of March 31, at 9.1 million tonnes, which greatly exceeded last year’s number of 7.9 million. Compounding the situation is the fact that demand for exports is still lagging last year’s pace, despite a steady crush rate.
There were ideas among participants that the numbers showed a decent buildup in on-farm stocks and a significantly lesser one in commercial stocks. This allowed the spreads to firm up, most notably the July/November pair.
The market also took strength from slow farmer selling, as many producers were busy seeding or refrained from heavy selling due to road bans.
Most participants in the canola industry also believe acreage will be higher than what StatsCan estimated in its last report.
When all was said and done, the dominant July contract gained $8.70 on the week, rising from Monday’s opening price of $527.10 per tonne and closing Friday at $535.80.
Export activity was reasonably steady and there are ideas it will increase in the near future if China and the U.S. can’t come to an agreement over trade issues. Commercial buyers in China have largely maxed out their soybean imports from Brazil and aren’t willing to pay a 25 per cent tariff to the U.S.
In the U.S., it was a bearish week for grains and oilseeds as large stocks situations curbed aggressive buying. While not all of the estimates from USDA were as high as some feared, they still added to the large stocks situations facing the futures.
The July soybean contract dropped roughly 17 cents per bushel on the week while the July (Chicago) wheat contract declined close to 13 cents.
The July corn contract fell over nine cents. To make matters worse for the bulls in the market, corn fell below its major support level of four bucks a bushel, which could set the stage for further selling in the days ahead.