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Canadian dollar’s holiday rally lifts ICE canola futures

A lack of USDA data leaves traders ‘buying the rumour’

The ICE canola futures market spent the holiday season like it usually does, paying attention to goings-on south of the border. However, near the end of the two-week holiday period, canola broke out on its own due to a rally in the Canadian dollar.

The holidays were kicked off by a partial U.S. government shutdown, which started Dec. 21 and lagged on until at least the time of writing (Jan. 7). The shutdown meant many regular U.S. Department of Agriculture (USDA) reports weren’t released, such as weekly export sales. This left traders guessing about U.S. soybean, corn and wheat sales, as rumours swirled China was making purchases.

The shutdown also left USDA choosing to delay the release of its latest stocks, crop production and world agricultural supply-and- demand estimates (WASDE) reports, which were scheduled to be out Jan. 11. The reports will receive new dates once government funding is restored. This should keep the markets quiet, though, as the January reports are usually known to be market-movers and set the tone for the new year.

The government shutdown had markets mostly quiet over the holiday season. The soybean market built itself up on the thought that sales were being made to China. Canola mostly followed suit and, as one trader said, not much would move the canola market until the U.S. government is back in business.

Once the government does start up again, it is sure to move the market. If the Chinese haven’t been making purchases as thought, commodity markets are bound to drop.

Toward the end of the holiday season, there was a shakeup in the markets. On Jan. 3, the equity stock markets dropped after Apple Inc. announced lower sales, which had everyone thinking this was a sign of a slowing global economy. The news sent traders into a tizzy and running to commodity markets, which shot up in response.

Canola found itself in an interesting spot, varying from the rising soy prices. The commodity boom pushed the Canadian dollar higher, which dragged the canola market down.

On top of this, the holiday season was tinged with remarks of waning interest in Canadian canola. The dollar’s rally only added to the thoughts of decreased interest, as a higher dollar means canola is more expensive on the international marketplace.

The holiday season was also filled with many reports from the Southern Hemisphere. News of dryness concerns in Brazil filtered out to oilseed markets. For weeks, estimates had been pegging Brazil to have a record soybean crop this year; however, dryness in key soybean-growing regions now has many analysts reducing estimates. While the crop is expected to be smaller, it is still expected to be larger than normal.

About the author

CNSC

Ashley Robinson writes for MarketsFarm specializing in grain and commodity market reporting.

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