Canola futures on the ICE Futures Canada trading platform suffered declines during the week ended April 29. Outright liquidation by speculative and commodity fund accounts fuelled the downward price slide. The losses were exaggerated by the triggering of sell-stop orders on the way down. Losses in CBOT (Chicago Board of Trade) soyoil and new-crop CBOT soybean contracts contributed to the price weakness.
The move by the Canadian dollar above US$1.05 during the reporting period was also viewed as bearish for the commodity.
The absence of demand from the domestic and export sector for either old-or new-crop canola also added to the downward movement.
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The April 26 seeding intentions report from Statistics Canada, pegging 2011 canola area in Canada at 19.225 million acres, also stimulated some of the selling interest. The estimate, which came in at the high end of pre-report projections ranging from 17 million to 19.3 million acres, had bearish implications. Seeded area to canola in 2010 totalled 16.818 million acres.
Using an average yield, canola output based on the acreage forecast could easily top 14 million tonnes, which would be up from the 11.9 million tonnes produced in 2010-11.
The western barley futures contract on the ICE platform remained inactive, with demand again non-existent. Meanwhile, cash bids for barley in Saskatchewan eased slightly while in Alberta values were steady to a bit firmer. Manitoba bids were unchanged.
CBOT soybean values traded mixed during the week ended April 29, with old-crop contracts up slightly while new-crop months saw small to modest losses. Firmness in the cash market helped to prop up prices as did the generally tight old-crop supply situation. Weakness in the U.S. dollar also had an underpinning price impact.
New-crop soybean values lost ground on ideas that area to the crop in the U.S. will be up despite the price advantage corn has over soybeans. The larger-than-expected soybean crop coming out of Argentina and Brazil also had bearish price implications.
Corn futures at the CBOT managed to post advances during the reporting period with tight old-crop supplies and the continued poor weather conditions for seeding in the U.S. fuelling the upward price action. Strength in the cash market, as U.S. producers withhold supplies until they know more about whether they will be able to plant a crop this spring, also generated a firm floor for values.
Profit-taking restricted the upside in corn, as did continued ideas that producers in the U.S. will still have plenty of opportunity to plant corn if a window of opportunity presents itself.
Wheat futures at the CBOT, KCBT and MGEX all suffered some significant price setbacks during the week ended April 29. Improved weather in some of the world’s wheat-growing regions stimulated some of the weakness. The arrival of much-needed precipitation in the key U.S. winter wheat-growing areas added to the bearish price sentiment.
Chart-based liquidation from speculative and commodity fund accounts was also evident and further pushed prices down.
Indications during the week that Ukraine and Russia might end their restrictions on wheat exports also contributed to the price weakness. Beneficial precipitation for European wheat crops also was an undermining influence on wheat futures.
GRINDING LOWER
There has been more than just a little concern expressed from a number of individuals about the steady grind lower seen in canola values on the ICE Futures Canada trading platform. However, it will be at least another two weeks to a month before the canola industry becomes concerned, as that’s when deadlines for putting canola in the ground come to an end.
There have been projections that between two million and five million acres of cropland will not be seeded this spring in Western Canada. Of that, one million acres were expected to consist of canola.
Normally by the first week of May, 10 per cent of the various grain, oilseed and pulse crops have been seeded. In 2010, seeding operations by the first week of May were already 15 per cent done, with Manitoba having one-third of its intended acres in the ground by that time.
Weather outlooks calling for wet and cool conditions through the first week or so of May will push seeding back to at least the middle of the month. Usually by the middle of May, roughly 50-60 per cent of the intended acres on the Canadian Prairies have been planted. There will need to be some serious effort by producers to catch up to the average.
The later the seeding, the more likely a change in what goes into the ground will occur. Canola, wheat and durum all have a longer growing season, and that could mean a switch from those intentions to something with a shorter maturity time frame.
The one good thing is that producers in Western Canada were said to have options already laid out should the weather not co-operate.
Another positive price development for canola was the unconfirmed reports this week that China and Canada were making progress on the blackleg disease issue which continues to hinder movement of the commodity to that country.
There were also ideas that Chinese rapeseed production will be down due to precipitation shortfalls, which could open the door for some additional Canadian canola exports in the upcoming 2011-12 crop year.
So a drop in acres due to weather combined with increased demand should mean better prices for canola…
Dwayne Klassen and Phil Franz-Warkentin write for Commodity News Service Canada,
a Winnipeg company specializing in grain and commodity market reporting.
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