The ICE Futures Canada canola market’s dominant July contract finished roughly $5 higher during the week ended May 5, after fund buying and a bullish stocks report lifted values out of their doldrums.
Statistics Canada pegged domestic canola supplies at 6.567 million tonnes as of March 31, below most analysts’ expectations. That amount is roughly two million tonnes less than at the same time last year. The total still came as a relief to some participants though, who feared there was even less canola in the system.
Whatever the case, many market-watchers expect Canada to run out of supplies before the new crop is ready, meaning rationing will almost certainly be needed in the coming months.
However, the precipitation that fell in Western Canada over the early part of the year has raised concerns the quality of the canola still left in Prairie fields will be poor and the country could have fewer supplies than thought.
Weather conditions across the Prairies have turned warm and dry over the past 10 days, helping many farmers get back on the field.
However, soggy fields in Alberta are still hampering producers who want to get crops off by early May.
Crush margins continue to benefit from weakness in the Canadian dollar. The loonie softened by roughly a quarter of a cent between May 2 and 5.
Intermonth spreading was still a feature as traders swapped out old contracts in the early going.
Expectations that this year’s oilseed acreage in North America will be large, along with steady soybean exports from South America, kept values in check.
From a technical level, canola seems headed towards a range of $530 to $540 per tonne, according to Mike Jubinville of ProFarmer Canada.
Demand from China is one variable though, as the country’s credit situation has some market-watchers worried.
Wheat values fell during the week as reports came in of higher-than-expected yields during a major wheat tour of the southern U.S.
Weak export sales in the U.S. and spillover losses from the wheat market also weighed down corn prices, albeit to a lesser extent. Slowing ethanol production was also bearish for corn.
Soybeans posted minor gains on the strength of solid weekly export numbers and wet weather in southern U.S. growing areas, which slowed field work.