The canola market started the week in a dismal situation, but that all changed Nov. 1 when a tweet sent the commodity markets flying. However, by the next day the canola market corrected and finished the week lower overall.
South American seeding and the ongoing trade war between China and the United States saw the canola market continue its downward trend from Oct. 29 to Oct. 31. On Oct. 31 the market hit yearly lows with the January contract closing at $486 per tonne.
At the time it didn’t seem like there could be anything that could give it support in the near future. Many expected the market to go lower still.
However, that all changed the morning of Nov. 1. The main driver of the commodity markets lately has been the China/U.S. trade war. Over the past few weeks there had been news that U.S. President Donald Trump would be meeting with Chinese President Xi Jinping at the G20 summit in Argentina at the end of November.
On the morning of Nov. 1 Trump sent out a tweet that got the market buzzing. He tweeted that he had a “long and very good conversation” with Xi about trade. The soybean market rocketed up almost 30 cents with support spilling over into the other commodity markets including canola.
While the tweet caused trade optimism it didn’t really include any new information. It was already known that Trump was to meet with Xi and Trump offered no hints at anything further in the tweet.
Trump was, however, trying to drum up votes for the Republicans ahead of the midterm elections on Nov. 6. Support is crucial for Trump and one trader said it wouldn’t be surprising if Trump tweets more seemingly magic excitement tweets like this ahead of the elections. So expect the trade war news to die down slightly after the elections.
In other oilseed market news, traders have been paying close attention to seeding in Brazil. News from the South American nation has seeding at a record pace with timely rains. Many are speculating we could see a huge crop out of Brazil which is weighing on oilseed markets.
Seasonal harvest pressure is continuing to weigh on the market. Producer canola deliveries into the commercial pipeline have hit record numbers in the past few weeks, and with the pace of harvest having picked up substantially towards the end of October it has weighed on the market.
In the U.S., dismal export numbers were overshadowed by Trump’s tweet. Weekly export numbers from the U.S. Department of Agriculture (USDA) released Nov. 1 showed low export values for corn and soybeans. While Trump’s tweet shot some optimism into the markets, the data showed what effect the trade war has actually had on American farmers.
The USDA also released its long-term agricultural projections on Nov. 2. Not surprisingly, soybean acreage is predicted to fall next year with corn and wheat acres growing. While soybean acreage has been extremely large in the U.S. lately, with the ongoing trade war, the U.S.’s largest customer for the crop disappeared overnight and farmers are looking for crops that have more stable and viable future outlooks.