The ICE Futures Canada canola market started off the week ending May 8 with a bang, seeing gains of nearly C$10 per tonne on Monday (May 4).
But that’s where the excitement ended. The following days were all pretty uneventful, with quiet activity that led to prices chopping around within a fairly narrow range. Some days were so quiet that some industry members joked about being put to sleep by the slow, “boring” activity.
The lack of aggressive action was linked to farmers stepping to the sidelines to focus on spring field work, seeding and putting cattle out to pasture in some parts of Western Canada.
Large commercial and fund accounts were also quiet, waiting for fresh news on the upcoming Canadian canola crop before making any big moves.
Conditions for seeding remained generally favourable during the week, and the process is going well for the most part across Western Canada, though some wet weather in Manitoba slowed progress in the latter half of the week.
Canola seeding was in its early stages in Saskatchewan, with eight per cent of the crop in the ground as of May 4, Saskatchewan’s Ministry of Agriculture reported.
Seeding is a little further advanced in Manitoba, but every region was at different stages, according to the Manitoba Agriculture department’s weekly crop report.
Alberta’s canola crop was about 14 per cent seeded overall as of May 5, with the south furthest along at 61 per cent complete, a report from the provincial government said.
Until seeding is complete and crops start to establish themselves, trade in the canola market is expected to remain quiet and choppy, as a lot hinges on the 2015-16 crop.
Supplies are on the tight side for Canada’s canola crop, highlighted by a smaller-than-expected estimate for stocks as of March 31 from Statistics Canada during the week. Canola supplies were pegged at seven million tonnes, a few hundred thousand below average guesses.
Tighter supplies could lead to ending stocks estimates dropping by up to 200,000 to 500,000 tonnes, which means the 2015-16 crop will need to be large in order to meet demand.
While Canada’s oilseed supply situation is fairly tight, the opposite rings true for the global oilseed supply situation, which is burdensome.
Because of this, canola could be trading independently from its usual leader, the CBOT (Chicago Board of Trade) soy complex, in the coming months, depending on weather conditions for both crops.
Strength in soyoil was helpful for the Canadian canola market during the week, and also helped soybeans move 10 to 12 U.S. cents per bushel higher.
Signs of continued strong export demand for U.S. supplies, and ideas that fast planting progress for U.S. corn could lead to reduced soybean area, were also bullish. Generally good conditions for harvesting in South America and favourable weather in the U.S. Midwest were limiting the gains.
Corn futures were steady to slightly lower, with favourable seeding conditions and a faster-than-expected planting pace in the U.S. behind the weakness. The market was well off its lows of the week, though, as steady demand, bargain hunting and strength in wheat were supportive.
Wheat values were stronger during the week, correcting off recent sharp declines. News out of the Kansas crop tour was also supportive, as yields came in slightly below expectations for winter wheat in the state.
A continued lack of export demand, strength in the U.S. dollar and good weather for spring wheat seeding in North America continued to overhang the markets.
All three commodities in the U.S. are likely to continue trading on weather going forward. The U.S. Department of Agriculture’s monthly supply-and-demand report on May 12 will also help provide some direction for markets.