ICE Futures canola contracts chalked up gains during the week ended August 3, underpinned by concerns about excess dryness in Western Canada.
Southwest Saskatchewan and southern Alberta are both in need of more rain as crops there remain under heat stress. Temperatures are expected to stay hot during the first week of August.
This has raised questions about yields as many farmers prepare for an early harvest.
A lack of farmer selling was supportive for values.
However, some of the bigger players may be waiting for new crop supplies to come online so they can buy their canola at a cheaper price.
The week was a unique one for canola futures as Monday marked the first time they were traded out of the United States. ICE Futures moved its canola-trading platform out of Winnipeg and into New York and the change resulted in some confusion early in the week. Some traders said they couldn’t make trades for several hours on Monday while another noted it took a long time for any significant trading to begin.
By mid-week most of the problems seem to have been taken care of but the volumes were incredibly small. Spread trade was also close to non-existent for a few days.
Whatever the case, canola still has bullish traders behind it who managed to push the most-active November contract up to the psychologically important $500-per-tonne mark on Tuesday.
The moment was fleeting however, as a sharp drop in soybeans and soyoil quickly sent the market plunging the next day.
Funds remain short in the market but could start buying given the right set of conditions.
Choppy trading has been a constant as of late due to the uncertainty with weather and the global trade situation. Many expect the U.S. to impose additional tariffs on Chinese imports at some point, however, it’s all a guessing game for now.
The Canadian dollar has shown some strength in recent days, moving above the 77 U.S. cents mark at one point before retreating.
Crush margins remain under pressure and many commercials are sticking to the sidelines for now.
In the U.S., soybeans have been marked by volatility due to trade tensions between China and the U.S. Early in the week, values rose on rumours the two sides were preparing to resume negotiations. However, that all changed when President Donald Trump suggested tariffs could be raised from 10 per cent to 25 per cent and prices dropped sharply.
The December corn futures rose by roughly seven cents during the week, taking support from strong gains in wheat. Stocks of ethanol in the U.S. were also lower than expected, prompting ideas of future demand. The summer’s heat wave in the U.S. Corn Belt has likely affected yields. Participants in one crop tour near Bloomington, Illinois pegged yields at just 145 bushels an acre.
Chicago wheat futures jumped 33 cents as concerns over dryness problems in Europe, Australia and the Black Sea region underpinned the market. There were also reports that Russian wheat exports could fall to as low as 35 million tonnes, which would be down two million tonnes from the year before. Rumours that Ukraine could possibly start to limit exports added to the upside.