ICE Futures Canada canola contracts fell to some of their lowest levels in months during the week ended June 15, before finding some support at the lows.
The new-crop November contract fell below $505 per tonne at one point during the week, but was back around the $510 level by Friday’s close. Chicago soybeans were also lower during the week, but never saw the corrective bounce as happened in canola.
Weather and trade were the two biggest market-moving factors during the week, and should continue to provide direction for the foreseeable future.
North American crop conditions are generally thought to be in good shape, which weighed on values. However, parts of Western Canada saw hail and heavy winds during the week, while others continue to miss out on any moisture.
The escalating trade war between China and the U.S. finally came to a head during the week, as the U.S. went forward with imposing tariffs on US$50 billion worth of Chinese imports. China threatened its own retaliatory tariffs, which would include soybeans. More tit-for-tat retaliation on both sides was being discussed, with other world trade also getting caught up in the dispute.
As far as grains and oilseeds are concerned, Mexico is considering imposing tariffs of its own on U.S. soybeans and corn. Tensions between Canada and the U.S also showed little sign of easing during the week.
While global trade and good Midwestern weather sparked the sell-off in the U.S. grains and oilseeds, the losses south of the border were exaggerated by bearish technical signals. Fund traders were heavy sellers in soybeans, corn and wheat as they liquidated long positions.
North American soybean, corn, spring wheat and canola crops still have a lengthy growing season ahead, but the winter wheat harvest is already progressing in the southern U.S. While yields were hurt by dryness, seasonal pressure could still keep a lid on any potential wheat rallies.
Dryness remains a concern in wheat-growing regions of Russia and Australia.
Wheat traders also received news during the week of the discovery of unapproved genetically modified wheat in Canada. The GM wheat was found on an access road in Alberta in summer 2017 and did not enter the commercial system. However, Japan said it wouldn’t be buying Canadian wheat until it gets some more assurances, and South Korea has also reportedly halted buying Canadian wheat.
The fallout on the markets has yet to be determined, but a slowdown in total Canadian wheat sales is a possibility.