It was a choppy time for canola contracts during the week ended Aug. 18, but underlying fundamentals have pushed the front-month contracts above the psychologically important $500-per-tonne mark.
Questions are growing about next year’s carry-out, as current trade guesses put the crop somewhere between 17.5 million and 19.5 million tonnes. A lot of the crop was late seeded too, which means it could still benefit from mid-August rains or be threatened by an early frost.
At the same time, a large proportion of canola fields, particularly in Manitoba and northern Saskatchewan, is looking good. Some harvesting has begun and the early returns from southern Manitoba are solid.
Although the dominant November contract has climbed above the $500 mark for now, the crop is still subject to price pressure in the near term. Off-the-combine deliveries could be just around the corner, along with the daily pressures in the soybean market.
Crush margins continue to dwell at their lowest point since last summer while the market does its best to ration existing supplies.
One factor acting against the market is the growing strength of the Canadian dollar. Friday’s inflation report sent the loonie rising toward the 80 U.S. cents mark. Weakness in the U.S. dollar has also contributed to the loonie’s rise.
It was a bearish week for the corn market as milder conditions in the U.S. Midwest and expectations of a massive U.S. harvest weighed down the market. Crop conditions, which had been stressed in July due to the heat, actually improved. The U.S. Department of Agriculture pegged yields at 169.5 bushels an acre, which surpassed traders’ estimates.
Soybeans chopped around for much of the week as solid demand for oilseeds offset some of the bearish weather factors facing the crop. As well, a group from China travelled to the U.S. for a crop tour, after which came an agreement to purchase 3.8 million tonnes of soybeans. U.S. export sales were also higher, which limited the losses. However, reports of bird flu outbreaks in the Philippines and China dragged on corn and soybeans.
The wheat market sunk lower as cooler weather and scattered rains brought relief to key sections of the U.S. Plains. Technical selling was also a feature. On the international front the news wasn’t any better, as many analysts say this year’s Russia wheat crop will likely be bigger than expected.