It was a wild ride for canola on ICE Futures during the Sept. 30 session with prices all over the place.
Coming out of the overnight session, canola was well poised on Thursday for a strong rally due to increased demand in the vegetable oil market. This stemmed from a power outage conundrum in China that has shut down several crushing facilities. One would think the sudden lack of oilseed processing in China would have generated a downturn in the global market. However, the country’s growing appetite for veg oils saw increases in imports, and that new demand is pushing prices upward.
Gains in Malaysian palm and Chicago soyoil spilled over into canola, as the Canadian oilseed approached its upper end of its current trading range. For the last several weeks, canola has bounced back and forth within $850 to $900 per tonne, with nothing dramatic enough to break it out of that range.
But the November contract climbed to $909.20 on Sept. 30, as soyoil topped 57.5 U.S. cents per pound. Then later that day came the unravelling, as the markets eased back a little just prior to the quarterly grain stocks report from the U.S. Department of Agriculture.
The boom came when soybean stocks did not tumble as much as the trade expected. Down they were, but not enough to sustain the increases in the Chicago soy complex. At 6.97 million tonnes, U.S. soybean stocks dropped 51.6 per cent from the same time in 2020. The markets predicted those stocks would be no more than 5.5 million tonnes and that difference meant prices fell hard. Soybeans dropped 25 to 28 U.S. cents per bushel while soymeal pulled back about US$12 per short ton. Soyoil retreated as well, but managed to recover for a decent increase.
However, that wasn’t enough for canola, as those double-digit gains from the morning were wiped out and replaced with red across the board.
The shock wore off as canola began to recover, with the nearby November contract limping over to the plus side for a brief moment before sitting back with a small loss.
With the canola harvest soon to wrap up for 2021, the trade will have to figure out how much was produced. Yields were obviously well below average due to the drought, but there’s little to go on until Statistics Canada comes out with its next production report in December. Supplies are very tight and will remain so for some time, but until that report, there’s no sense of certainty, other than it’s likely under 12.8 million tonnes.
