Canola values remained sluggish and rangebound during the week ended Sept. 27, dampened by large carry-out stocks and uncertainty regarding 2019 production volumes.
As harvest drags out across the Prairies, challenging weather conditions could begin to harm crop quality. While Statistics Canada earlier in the month predicted canola production to be around 19.358 million tonnes, final ending stocks could be considerably hampered where weather degrades crop conditions.
However, the 19.358 million tonnes are an increase of 900,000 tonnes from earlier estimates, which is limiting to any sort of upward momentum.
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Despite continued disinterest from China, increased demand from the European Union has provided support to values. Traders anticipate more demand from the European Union later in the year, totalling between one million and three million tonnes. If a deal with China were to come back into the mix, export sales would be considerably stronger.
Rumours that the United States and China are very close to a trade deal were bolstered by China buying considerable amounts of U.S. soybeans over the past week. China has also purchased U.S. pork, due to African swine fever ravaging the nation’s hog population.
A preliminary trade deal between the U.S. and Japan has also struck a more positive tone for global trade relations.
Despite warmer relations, considerable geopolitical risk south of the border is a dark cloud over the markets, as impeachment proceedings against U.S. President Donald Trump will inject significant volatility into many economies.
