Much-needed rain fell across large areas of Western Canada during the week ended June 1, weighing on canola prices as traders took some of the weather premiums out of the market and farmers became more willing sellers.
Chart-based selling added to the declines, as canola backed away from major upside resistance. The July contract had touched $540 per bushel on May 25, but a front-month contract has not held above that level for a number of years now and speculative profit-taking came forward to weigh on values as weather concerns eased.
However, technical signals and the actual supply/demand fundamentals of Prairie weather largely played a secondary role in the markets, with trains and trade the bigger stories of the week.
A strike by Canadian Pacific Railway conductors and engineers proved short lived, only lasting one day. However, the uncertainty cast a pall over canola before the issue was quickly resolved. While no time is ideal, this is probably the slowest time of year for rail movement.
However, just as the rail situation cleared up, trade issues moved back to the forefront. U.S. tariffs on steel and aluminum went into effect, sparking a round of retaliatory tariffs from Canada and the European Union. The U.S. also continued its back-and-forth dispute with China, keeping uncertainty in soybeans and corn. On top of that, Canadian agriculture was also in the crosshairs of U.S. President Donald Trump’s Twitter musings by Friday. What will become of all of the latest trade uncertainty stirred up by Trump remains to be seen, but the resulting chaos has been bearish for grains and oilseeds on both sides of the border so far.
Soybeans, corn and wheat futures in the U.S. were all lower over the course of the week as they retreated from nearby highs. In addition to trade-related bearishness, traders were also reacting to the latest weather forecasts. Good weather in the U.S. Midwest had soybean and corn plantings nearing completion, with condition ratings generally thought to be looking much better than the previous year. Meanwhile, the winter wheat harvest is starting up in the southern Plains. That harvest pressure could limit the upside in wheat in the short term. However, yields were hurt by drought during the growing season and confirmation of the smaller crop as the harvest progresses could be supportive.
Dryness in other wheat-growing regions of the world, including Australia and the Black Sea region, also has the potential to provide more support for wheat going forward.