Canola trade already looking past acreage estimate

However, fewer acres could mean tight supplies to come

ICE Futures Canada canola contracts held narrowly rangebound during the week ended April 24, but managed to move higher overall, with the biggest gains in the new-crop months.

Statistics Canada’s acreage intentions report, released April 23, provided the big news for the week as far as canola was concerned. However, even the first official acreage numbers of the year were met with a collective shrug by the futures market.

StatsCan forecast canola plantings at 19.4 million acres, which would be down by nearly a million acres compared to 2014. The seeding intentions were in line with trade guesses, but at the low end. Many industry participants were of the opinion that actual area will need to hit 20 million, or the supply/demand balance sheet could get tight for canola, given the rising domestic crush capacity.

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Seeding operations are now underway, and any adjustments remain to be seen. However, a million acres here or there have a much smaller impact than yields on the bigger production picture. At 19 million or even 20 million acres, a one-bushel-per-acre adjustment in average yields would have a 400,000-tonne-plus impact on the total crop size.

As a result, weather will become more and more of a factor as the growing season progresses.

Weather was a major force in U.S. futures during the week as well, with some good seeding conditions across the U.S. Midwest dragging on the corn market. Corn fell to its lowest levels in six months, and while some bargain hunting came forward at the lows, there could still be more room to the downside.

Soybeans, meanwhile, were narrowly mixed, with prices lacking any clear direction for the time being.

Renewed concerns over another truckers’ strike in Brazil were somewhat supportive, although the country’s ports are still reported to be well supplied with beans in export positions despite the latest labour dispute.

Wheat acres seen rising

Wheat was mixed as well, with improving moisture conditions in the southern U.S. Plains weighing on Kansas City futures and a fast seeding pace in the north weighing on Minneapolis spring wheat. Chicago soft wheat, meanwhile, edged up in the new-crop months but the futures remain rangebound overall.

StatsCan projected Canada’s wheat seedings at 24.8 million acres (winter, spring and durum combined), with the biggest increase in durum, up from 23.8 million in 2014.

The biggest move in the U.S. futures during the week came in the lightly traded oats market, which had a bearish reaction to Canada’s acreage estimate. StatsCan pegged oats area at 3.6 million acres, a 30 per cent increase on the year and well above average trade guesses.

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Phil Franz-Warkentin - MarketsFarm

Phil Franz-Warkentin writes for MarketsFarm specializing in grain and commodity market reporting.

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