It still holds true that what goes up, must come down — but whether it stays down remains to be seen as the ICE Futures canola market enters another uncertain growing season.
The old-crop July canola futures hit a contract high of $1,219 per tonne on May 17, but was about $70 off that level by the close two days later. New-crop contracts were also up and down during the week, with the November contract trading within its own $70 range.
The rise and fall of the global appetite for risk was a feature of the activity in all the commodity markets, with canola at record-high levels definitely a risk situation by most metrics — despite the underlying supportive fundamentals. Speculators are still long the canola market overall, but likely were looking to take some money off the table.
Seeding delays in the eastern Canadian Prairies, due to excessive moisture, and ongoing dryness concerns in the west should be keeping a bit of a weather premium in canola for the time being. However, with a window of better seeding weather in the forecasts for Manitoba and eastern Saskatchewan, there’s still plenty of time to get the crop in the ground. When it is seeded, the improved moisture conditions bode well for production — which would limit the chances of a retest of the highs.
However, as always, the canola market doesn’t trade in a vacuum and will watch what’s going on elsewhere closely.
Such outside influences include other vegetable oil markets. Indonesia announced it would restart palm oil exports, after briefly restricting them over the past month. Soybean planting is underway in the United States, with a late start but generally favourable conditions. Crude oil remains volatile, with the ongoing conflict in Ukraine and general economic uncertainty overhanging everything.
Wheat futures saw some wild swings of their own during the week, with news India would restrict wheat exports providing the initial catalyst for a sharp move higher. India had recently said it would increase exports to help alleviate the global tightness caused by the conflict in Ukraine. However, excessive heat in the country forced India to back away from that commitment to shore up domestic supplies. However, rather than an outright export ban, some Indian wheat will still be moving — lessening the impact on the futures.
Meanwhile, a crop tour of U.S. winter wheat-growing regions provided confirmation on the poor state of the crop in many parts of the southern Plains, with average yields down considerably on the year. Also, the wet weather delaying canola seeding in the eastern Canadian Prairies has also dipped into the major spring wheat areas of the northern U.S. Spring wheat seeding is running behind normal, with the progress over the next few weeks likely to provide some price direction.
