ICE Futures Canada canola contracts climbed higher over the course of the week ended June 30, hitting their best levels in months, despite large North American oilseed acres confirmed by Statistics Canada and the U.S. Department of Agriculture.
Record Canadian canola seedings and a six-million-acre increase in U.S. soybean area would typically be bearish for the two oilseeds, but both futures markets posted sharp gains during the week.
November canola was at its best levels in a month by Friday’s close, at just under $500 per tonne. The November CBOT (Chicago Board of Trade) soybean contract was also at its best level of the past month, at just over US$9.50 per bushel.
For canola, Statistics Canada pegged planted area at 22.8 million acres, which would be up 12 per cent on the year. However, traders were second-guessing the number as soon as it came out, while persistent weather concerns in parts of Western Canada had investors building a weather premium into the futures.
While the canola acres are large, demand also remains strong and the canola sector needs a big crop in order to meet its growing commitments.
For soybeans, USDA’s forecast of 89.5 million acres was big, but still below average trade guesses, as the market had expected more corn acres to shift into beans this spring. Soybean stocks in the U.S. as of June 1 were also below estimates and deemed supportive, despite being the largest at that time of year in the past decade.
While the USDA numbers sparked a speculative rally in soybeans, the underlying fundamentals really aren’t that bullish as far as beans are concerned. Midwestern crop conditions remain relatively favourable for the time being, and there’s a case to be made that soybeans could post a hasty retreat once activity picks back up in the futures following the Canada Day and Independence Day holidays.
There’s more likelihood of additional strength in canola, but the Canadian market is usually reluctant to go it alone, so any further gains may be short lived if soybeans don’t help out.
The month-long rally in Minneapolis spring wheat finally spilled into the Chicago and Kansas City winter wheat contracts during the week, with all three markets posting large gains.
Minneapolis remains the front-runner, as mounting drought concerns in the key wheat-growing regions of North Dakota and Montana are cutting into the yield prospects there.
Acreage data from USDA placed total wheat seedings in the country (winter and spring combined) this year at 45.7 million acres. That’s the smallest wheat area since records began nearly 100 years ago. Canada’s total wheat area was down on the year, but most of the loss was in durum, with other spring wheat a bit higher than 2016.
Canada’s wheat crop is also facing some of the problems seen in the northern U.S., but is faring considerably better overall, according to the most recent provincial reports.
Corn prices were also higher during the week, taking their cue from the rally in soybeans and wheat.