North American grain and oilseed contracts saw choppy activity during the second week of May, moving up and down as the growing season for most crops got underway and traders looked to cover some risk in the face of uncertainty.
For its part, the ICE Futures canola market showed independent strength relative to other vegetable oil markets, with crush margins narrowing somewhat. Seeding operations around the Prairies were varied, although they should pick up in the latter half of May.
Canadian canola exports through 40 weeks of the current crop year, of 6.77 million tonnes, are running well ahead of the year-ago pace of 4.41 million tonnes. However, that movement could slow down in the weeks ahead, as old-crop stocks tighten and buyers turn their attention to cheaper new-crop supplies.
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In a report released May 9, Statistics Canada pegged total canola stocks as of March 31 at 5.95 million tonnes. That was up from the previous year’s level of 5.16 million but well off the five-year average of 8.76 million.
From a chart standpoint, the most active July contract was hovering near its 20-day moving average but remains well below its longer-term 100-day average above $800 per tonne. A retest of that $800 area could be possible if any new-crop concerns develop.
Barring that, the market appears comfortable within a range of $700-$750 per tonne for now. The new-crop November contract traded to either side of the psychological $700 level during the week, with nearby support around $680 and resistance at $720 per tonne.
In the United States, planting of soybeans and corn was running well ahead of normal, keeping a lid on the upside for the row crops. Further south, crop projections out of Brazil continued to see upward revisions and increasing export competition out of the country was being felt in the Chicago futures. Broader macroeconomic money flows were also at play, with renewed economic worries out of China adding to demand concerns.
Activity in wheat saw the hard red wheats gain ground relative to Chicago soft wheat, with Kansas City hard red winter wheat moving to a premium over Minneapolis spring wheat.
The Kansas City and Minneapolis futures each have their own supportive fundamentals, with historically poor crop ratings for U.S. winter wheat to the south and a late start to spring seeding for spring wheat in the northern growing regions.
Uncertainty over the situation in Ukraine remains a feature in the background of the wheat market. Extension of the Black Sea grain shipping corridor is in question and set to expire on May 18.
