ICE Futures Canada canola contracts moved to their highest levels in three months during the week ended March 2, having posted gains for 10 straight sessions. Losses in the Canadian dollar and gains in Chicago Board of Trade soybeans helped keep speculators on the buy side.
While the May canola contract rose by $25 per tonne over the month of February, the commodity is actually cheaper from an end-users’ perspective than it was at the beginning of the month.
The Canadian dollar lost four cents relative to its U.S. counterpart since the beginning of February. May canola, trading at $527.10 per tonne on March 2, works out to US$408.50 with the Canadian dollar at 77.5 U.S. cents. At the beginning of the month, that same contract trading at $500 on Feb. 1 was actually worth about the same in U.S. dollars, at US$406.30 per tonne, with the currency at 81.3 U.S. cents.
Factor in sharp advances in soymeal and a relatively steady tone in soyoil, and canola crush margins widened to about $90 per tonne over the futures, from only $65 a month ago. Those good margins should be keeping processors on the buy side, although export demand has tapered off in recent weeks.
Problems moving grain out of Western Canada were causing some headaches for both farmers and grain companies, with the backlog on rail movement slowing exports. The vessel lineup in Vancouver widened to 31 boats waiting to load in the latest weekly grain-handling report compiled by the Quorum Corporation. That’s well above the average for the year.
Canada has exported six million tonnes of canola during the crop year to date, according to the latest Canadian Grain Commission report. That’s about 200,000 tonnes behind the pace seen at the same point a year ago. Domestic disappearance, at 5.1 million tonnes, is also falling behind the year-ago pace, which saw 5.5 million tonnes crushed by this point.
If the crush and exports don’t pick up, ending stocks projections could see upward revisions going forward, with the official estimates already rather large at two million tonnes.
In the U.S., concerns over dryness in Argentina provided the catalyst for advances in both soybeans and corn as production estimates out of the South American country continue to be revised lower.
Wheat posted sharp gains over the course of the week as well, with dryness across the southern U.S. Plains giving the Chicago and Kansas City winter wheat contracts a boost.
Minneapolis spring wheat lagged to the upside, with the spreads between the spring wheat and winter wheats starting to narrow back in to more traditional levels after a drought in the northern Plains last year caused spring wheat to rally.
Looking ahead, the mounting possibility of a trade war — brought on by threats of tariffs on steel and aluminum by U.S. President Donald Trump — will be followed closely by the agricultural markets. China in particular is a major buyer of U.S. soybeans and corn, but could impose tariffs of its own. Stock markets already dropped in response to Trump’s comments, while the currency markets also saw large moves.