ICE Futures canola contracts held within a rather narrow range during the week ended Sept. 7, with even a pair of Statistics Canada reports unable to break the market out of its sideways pattern. Prairie harvest operations are moving north, and weather conditions and yield reports will be followed closely for at least the next couple of weeks.
Statistics Canada on Aug. 31 pegged this year’s canola production at 19.2 million tonnes, which was below average trade guesses and well off the 21.3 million tonnes harvested in 2017-18. That headline number should be supportive, but Statistics Canada is notorious for underestimating the size of the crop in its August report. As a result, traders appear content to run with that theory, even when accounting for adverse weather that hit many fields after the survey was conducted.
The production report was followed by an ending stocks report released Sept. 6. Those numbers were relatively neutral as far as canola was concerned. The 2.4-million-tonne carry-out stocks in the country as of July 31 were about a million tonnes above the year-ago level, but still at the lower end of trade expectations.
While such large old-crop supplies would have been decidedly bearish in the past, demand has grown over the years and those supplies should easily move through the system.
A weather scare during the week was also not scary enough to knock the market higher. Widespread frost hit many parts of the Prairies, which could cut into yields and lead to quality downgrades.
However, as is often the case, the situation south of the border should continue to play a major role in Canadian grain prices.
The persistent palace intrigue out of the White House drew most of the focus yet again, although less exciting trade developments were more important as far as agricultural markets were concerned. North American Free Trade Agreement (NAFTA) negotiations made no real headway, while the U.S. and China were threatening more retaliatory tariffs in their escalating trade war.
On the actual ground, conditions for U.S. soybean and corn crops remain reasonably favourable, and the U.S. Department of Agriculture is expected to confirm large production numbers in a report out Sept. 12. Any surprises in that data could sway the futures.
For wheat, all three U.S. wheat contracts found themselves in a steady downtrend during the week. While Russia may be dealing with a drought, Russian officials announced they would not be limiting exports. A rising U.S. dollar was also bearish for the wheat market, as the strong currency makes U.S. wheat more expensive for international buyers.