Stalled harvest progress across Western Canada saw canola prices move steadily higher on the ICE Futures platform for most of the week ended Sept. 28. While cool and wet conditions should remain a supportive factor as long as they persist, activity in the Chicago soybean complex could override any weather-related strength.
Manitoba farmers got most of their canola crop off the fields before the cool and wet weather set in, with only 15 per cent still to go as of Sept. 24, according to the weekly provincial report. However, Saskatchewan and Alberta face significant challenges. Only 48 per cent of Saskatchewan’s canola crop was harvested as of Sept. 24; in Alberta, the canola harvest was at a standstill, at only 16 per cent complete as of Sept. 25.
Yield and quality downgrades will become a bigger issue the longer the harvest drags out, but there is also still plenty of time before winter sets in for good, and end-users are not yet that aggressive on the buy side.
Some short-term chart signals shifted higher during the week, although canola remains in its longer-term sideways trading trend.
Canada, the U.S. and Mexico reached a tentative deal over the weekend that would replace the North American Free Trade Agreement. Concessions for the dairy sector were the headline news in the ag sector Monday morning, but activity in the Canadian dollar had more of an impact on canola. The U.S.-Mexico-Canada Agreement (USMCA) sent the Canadian dollar climbing sharply higher, which led to a bearish reaction in canola. Meanwhile, soybeans climbed higher on the trade news and the resulting weakness in the U.S. dollar index.
While a new North American agreement was supportive for soybeans, the ongoing trade dispute with China remains a bearish influence in the background.
Seasonal harvest pressure should also limit any nearby upside in soybeans, with large U.S. supplies soon to be flooding the market.
Large old-crop stocks of both soybeans and corn in a quarterly stocks report from the U.S. Department of Agriculture were also bearish for the commodities.
U.S. soybean stocks, as of Sept. 1, of 438 million bushels beat trade estimates and came in well above the 302 million bushels on hand at the same point a year ago. U.S. corn stocks of 2.14 billion bushels were above trade estimates, but still slightly below the 2.293 billion on hand at the same point in 2017.
Wheat futures moved lower during the week, with rising U.S. production estimates behind some of the selling pressure. Total U.S. wheat production for 2018-19 was pegged by USDA at 1.884 billion bushels. That was up by seven million bushels from an earlier estimate. Spring wheat production in the country, at 623 million bushels, was up by nine million from the August estimate and well above the 385-million-bushel crop grown last year.