By far the biggest factor for canola bids this past week was the weather. Persistent dry conditions throughout much of Western Canada have continued to provide a weather premium for canola, which helped to spur a 10-day rally that ended June 6.
Starting May 24, the July ICE contract gained $12.90 per tonne to reach $454.70 on June 6. Gains for the November, January and March contracts ranged from $12.10 to $13.10 per tonne.
A forecast for rain over this past weekend put a damper on bids and snapped the rally with losses of $1.70-$3.20 per tonne. Come Monday morning, bids were climbing again as rain across the Prairies failed to come down in significant amounts.
While dry conditions were helpful for planting on the Prairies, the lack of precipitation has resulted in poor germination and growth.
Agriculture and Agri-Food Canada’s Drought Monitor has reported 37 per cent of Western Canada is in a moderate to severe drought. That has meant one good shower won’t rectify poor soil moisture conditions. However, a timely rain would breathe a little life into canola, perhaps with enough “oomph” to make it to the next rainfall.
Two reports from the U.S. Department of Agriculture this week will guide canola prices. USDA’s crop progress report will illustrate how much further along farmers in the U.S. Midwest and Plains regions have come this past week. Corn and soybean planting are well behind pace, while spring wheat should be completed or very close to it.
Should U.S. farmers be catching up, prices could slip on the Chicago Board of Trade. While contending with the wettest year in several decades, farmers were expected to switch from corn to plant soybeans. However, conditions have been so wet that there’s a strong likelihood that farmers won’t be able to finish all of their planting this year.
As with the dryness on the Prairies, the wet conditions in the U.S. will provide support for commodity prices, especially if soybean planting comes up short.