The canola market edged higher on the week as investors short-covered in the face of weather concerns in Western Canada.
Positioning into a report from the U.S. Department of Agriculture was also a feature, though the data was less of a market mover than weather-based influences.
Ahead of the weekend, traders were looking for rain, and concerned about too-dry areas in Western Canada, which buoyed ICE Futures Canada canola’s July contract by close to $15 per tonne in the week ending June 9.
Rains were critically needed in areas of Western Canada, and though parts of Manitoba, Saskatchewan and Alberta saw showers over the weekend, more moisture is needed in some areas, while others have become too wet.
Variability and uncertainty throughout the growing season are likely to keep a weather-related premium in the market in the near term.
The majority of Canada’s canola has been seeded, with projections around 95 per cent, and some traders expect the crops that aren’t in the ground will be shifted to other commodities.
USDA released its world agricultural supply-and-demand estimates (WASDE) report on June 9. While the effects of that report were tepid, and likely to have a short-lived effect, the data provided a sense of clarity to the market about what the upcoming supply situation will look like.
Most directly applicable to canola, USDA projected world soybean ending stocks for 2016-17 at 93.2 million tonnes — well above what market watchers had expected.
However, global carry-out for 2017-18 was mostly steady.
The effects of that report were quickly shrugged off, as concern about production in the U.S. Midwest supported values.
The oilseed market had been underpinned by forecasts for record-high heat. During the weekend, areas of the U.S. also saw hail, which could damage crops, and further kept the market supported, causing spillover to canola.
Dry crops in the northern Plains are expected to see beneficial rains this week, which will provide some reprieve to thirsty crops, and pressure values.
However, some market watchers say that may not be enough to replenish soil moisture.
On the grain side of the market, world carry-out of corn stocks are expected to reach 224.6 million tonnes for the current marketing year, USDA said — higher than previous estimates, but within what analysts had expected.
In 2017-18 that number is expected to tighten to 194.3 million tonnes.
The corn market was also supported by weather-related concerns, with ideas that key growing areas are too dry.
World wheat production in 2017-18 is estimated at 739.53 million tonnes, down by about 15 million tonnes from the prior year, but up from earlier estimates.
Carry-out is expected to be up at 261.2 million tonnes from 2016-17’s 256.4 million tonnes.
Wheat markets have struggled with a bearish supply-and-demand situation, and the USDA data indicated little reprieve from those fundamentals.
But the weather-attentive market has focused on concerning weather issues — namely, spring wheat production in northern U.S. growing areas, which are hot.