Weather supportive for canola crops, albeit not for prices

Uncertainty also continues over U.S. soybean acreage

Canadian canola started the spring off dry, but has seen some beneficial moisture in many areas since.

ICE canola futures fell hard during the week ended July 5, hitting fresh contract lows in the process as improving North American weather conditions weighed on prices and bearish technical signals had speculators adding to their short positions.

The canola market was closed Monday for Canada Day while the Chicago futures market was closed on Thursday for Independence Day in the United States. The holiday activity likely exaggerated the moves in the futures to some extent, with many participants on the sidelines.

Weather uncertainty was a major factor during the week, and should be a major factor to watch over the next two months.

Canadian canola started the spring off dry, but has seen some beneficial moisture in many areas during the first weeks of summer. The question of what it all means for yields and actual production will be played out as the growing season progresses.

Meanwhile, excessive moisture delayed seeding and hurt early development for U.S. soybeans. Conditions across the Midwest have now turned warmer and drier, but could easily turn too hot.

Just how many acres were actually planted to soybeans is also a mystery. The U.S. Department of Agriculture came out with a much smaller-than-expected estimate of 80 million acres, but acknowledged that the late planting window this year likely skewed the numbers and will be conducting a re-survey. Traders believe more intended corn acres went into soybeans instead, but confirmation of that theory won’t come until USDA releases new numbers in August.

That extra level of uncertainty should keep the bean and corn markets on edge, with any volatility there spilling into the Canadian markets.

While soybeans could see some weakness, the fundamentals look a bit more solid for corn as any increases in soybean area would come at the expense of the grain.

Global trade talk uncertainty remains another wild card in the background. The U.S. and China are at least talking, but Canada’s diplomatic situation with the major Asian buyer remains frosty.

From a technical standpoint, November canola fell to contract lows during the week and moved below major previous support at $445 per tonne.

Swing targets would place the next downside support in the $415- to $420-per-tonne range, but there’s a case to be made that the lows might be in for the time being.

While there has been enough rain to spark some speculative selling in canola, the crop is still far from perfect. Germination was spotty and reaching ‘average’ yields may prove difficult.

About the author


Phil Franz-Warkentin - MarketsFarm

Phil Franz-Warkentin writes for MarketsFarm specializing in grain and commodity market reporting.



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