ICE Futures canola contracts fell hard in late May, hitting their weakest levels in more than two years on May 31 before uncovering some support to rise above those lows to start June.
Where the market goes from here remains to be seen, as a case can be made for either more losses or a corrective bounce.
November canola hit a contract low of $611.20 per tonne on May 31, with a test of psychological support at $600 a possibility from a chart standpoint. However, there are also signs the market is looking oversold, so a move back to the 20-day moving average around $670 is equally likely.
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Even if there is a corrective bounce, values would have to move considerably higher to say the downtrend was broken.
On the bearish side, spring seeding is wrapping up on the Prairies and weather conditions look relatively favourable despite persistent dryness in some areas. Large oilseed crops elsewhere in the world and broader macro-economic issues also weighed on values.
Old-crop canola supplies are thought to be getting tight, but there are no real worries about running out ahead of harvest and the old/new crop spread narrowed during the week. Crushers may still be making good money processing old-crop canola, but export customers are likely backing away from the market in favour of cheaper new-crop supplies.
Canada has exported 7.2 million tonnes of canola through 43 weeks of the 2022-23 crop year, according to Canadian Grain Commission data. Total movement is expected to top eight million tonnes, but may not reach the 8.4 million forecast by Agriculture and Agri-Food Canada.
Soybean and corn futures in the U.S. saw a similar pattern as the calendar flipped from May to June, falling lower at one point before uncovering support.
While an active U.S. seeding pace accounted for selling pressure in soybeans and corn, the midwestern forecasts turned hot and dry, lending price support.
November soybeans hit a low of US$11.305 per bushel on May 31. December corn had slipped below $5 per bushel earlier in May before weather issues underpinned values.
Weather conditions through the growing season will be the main driver in day-to-day futures trade. Large Brazilian crops entering the global export market are a bearish background influence. Broader macroeconomic activity will also be at play. An agreement by the U.S. government to raise its debt ceiling removed some uncertainty from the financial markets for now.
Wheat is in a different situation, with the winter wheat harvest moving forward across the Northern Hemisphere. The hard red winter wheat grown in Kansas and Oklahoma is in rough shape this year after dealing with drought through the growing season.
Other world wheat crops are in better shape, with big harvests expected out of Europe, Russia and India all keeping world wheat supplies comfortable overall.
Spring wheat seeding caught up to average levels in the U.S. after earlier delays, with generally favourable crop prospects.
