ICE Futures Canada canola contracts trended higher for the past two weeks, despite seasonal harvest pressure, although the bigger picture remains sideways and rangebound.
The November contract briefly traded above the 200-day moving average of $497 per tonne on Sept. 22, on the back of some fund buying triggered by a rally in Chicago soybeans. However, that key chart point held as resistance, and the contract finished the week closer to its 20-day average, at $494.80 per tonne. The contract finds itself right in the middle of a broad range from about $475-$525 per tonne.
The canola harvest saw setbacks in Alberta during the week, with cool and wet conditions including snow in some cases. However, farmers continued to make good progress elsewhere across the Prairies, and the market remains focused on a large crop. Producer deliveries into the commercial pipeline topped half a million tonnes for the third straight week in the latest Canadian Grain Commission data, which should leave end-users with little reason to bid up the market.
Statistics Canada on Sept. 19 released an updated model-based production estimate that uses satellite imagery, rather than farmer surveys, to gauge the size of the crop. The model-based number for canola, 19.7 million tonnes, would be a new record, and compares with the August survey of 18.2 million. While that’s already a large number, many analysts are still looking higher, pencilling a ‘20’ in their supply/demand calculations.
However, even with a record-large crop, world demand for oilseeds remains strong as well and any production issues elsewhere in the world could provide the spark that would break canola out of its sideways range.
The U.S. soybean harvest is just getting started, while South American farmers will soon be seeding their next soybean crop. Early U.S. soybean yields reports are beating expectations, but only four per cent of the crop was in the bin in the latest U.S. Department of Agriculture report. In South America, traders are watching dry conditions in Brazil and excessive moisture in Argentina, with both extremes likely to cut into the crop prospects.
With actual U.S. yields still up in the air as the harvest progresses, traders may be reluctant to push soybeans or corn too far one way or the other.
In wheat markets, futures trended higher over the course of the week, with the Minneapolis spring wheat contracts outpacing the Chicago and Kansas City winter wheats to the upside. Concerns over tightening supplies of higher-protein wheat accounted for some of the relative strength in Minneapolis, while relatively favourable winter wheat seeding conditions in the southern U.S. Plains limited the upside in those contracts.
Reports of large Russian wheat supplies also weighed on prices to some extent, although those big crops were countered by dryness concerns in Australia and the excessive moisture in Argentina.