Canola futures on the ICE Futures Canada trading platform continued their upward trek during the week ended Oct. 22. The strength displayed by canola was again linked to Canada’s domestic processing industry who have an aggressive crush program in place. Favourable crush margins and good canola product sales on the books have resulted in this strong demand.
The uptrend in canola was also associated with the pullback experienced by the Canadian dollar, which was said to have triggered exporter demand as well. Much of the export interest was said to be pricing old business to Japan and Mexico, but there were also rumblings of some fresh sales being made to China during the reporting period. Fresh speculative buying was also evident.
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Much of the selling that surfaced in canola was associated with profit-taking, overbought price ideas, and elevator company hedge offers, as farmers continued to deliver newly harvested canola into the cash pipeline.
Western barley futures continued to be inactive.
CBOT (Chicago Board of Trade) soybean futures also continued their climb to higher ground, establishing a new 14-month high during the week. The steady sales of U. S. soybeans into China provided much of the upward price momentum. Strong global soybean consumption coupled with a weaker U. S. dollar also were linked to the rally.
The upside in soybeans was restricted by profit-taking, overbought price sentiment and some late-week speculative liquidation.
Corn futures at the CBOT suffered a minor setback in value, with a drop-off in end-user demand sparking the selling interest. Adding to the bearish price sentiment in corn was profit-taking and the advancing U. S. corn harvest. Commercial and speculative buying on price breaks managed to limit the downward momentum, with much of that buying tied to the uncertainty of 2010 production and the threat of further tightening of U. S. supplies in the U. S. Department of Agriculture’s November crop report.
CBOT wheat futures posted some modest to sharp losses during the week as demand for the commodity faded dramatically. Weather outlooks calling for beneficial precipitation in the U. S. winter wheat belt also helped to fuel some of the downward price slide.
OVER THE THRESHOLD
The movement of the November canola future above the $500-per-tonne level during the past week was certainly a momentous occasion, as that level for canola continues to be a rare event. However, with that price now being achieved, there are already ideas among industry participants that the $550 plateau will be next.
There will no doubt be some downward corrections for canola going forward, but the fundamentals suggest that the uptrend should continue. The big question is, for how long?
Canola managed to actually lead the North American oilseed complex up on a couple of days this past week, with those advances fuelled directly by demand. Participants in the canola industry had difficulty in coming up with any confirmed export business, but there’s no doubt sales of canola were being put on the books.
There are currently a lot of undeclared vessels arriving to pick up canola at Vancouver, with a number of ships on the larger scale and likely destined for China or Pakistan.
Canada’s canola exports to date are also running ahead of the year-ago pace with 1.375 million tonnes shipped, compared with 1.263 million at the same time a year ago.
Domestic disappearance of canola is also running at a significantly higher pace than at the same time a year ago. Granted, some of that can be attributed to the fact Canada’s canola-processing industry has grown, but nonetheless, the pace requires steady farmer deliveries. Canadian Grain Commission figures as of Oct. 17 showed 1.123 million tonnes of canola have been processed, which easily surpasses the year-ago level of 823,000 tonnes. New domestic canola crush records are anticipated in 2010-11 (August to July) as a result.
If this kind of demand can continue, the $550 futures price for canola may be achieved, but producers might still want to start thinking about forward-pricing at least a portion of their new-crop canola for fall delivery in 2011, with fall 2011 bids already in the $10.50-per-bushel area, if not a bit higher.
UNDER THE RADAR
There also continues to be some debate about exactly how much area was unseeded in Western Canada, with crop insurance numbers not lining up with figures provided by Statistics Canada.
There were ideas that StatsCan’s current total Canadian acreage estimate is at least two million acres too high. Of that amount, one million acres were believed to have consisted of wheat, 500,000 tonnes of canola, and 500,000 made up of barley, oats and peas.
With the canola harvest finally wrapping up, there had been ideas that yields for the crop were significantly better than had been anticipated. Canola production estimates as a result were starting to lean toward the 11-million-tonne mark, rather than the 10.4 million the government agency recently projected.
However, the reduced-acreage theory could make things a bit more interesting and help propel canola futures upward.
Dwayne Klassen and Phil Franz-Warkentin write for Resource News International (RNI), a
Winnipeg company specializing in grain and commodity market reporting.
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