The ICE Futures canola market moved steadily higher during the first week of the new 2021-22 crop year, recovering from one-month lows as the disappointing state of this year’s crop became clearer.
Opinions on just how small canola production will be this year are still wide ranging, but the 19.9-million-tonne preliminary estimate from Agriculture and Agri-Food Canada is likely a few million tonnes too high. Some analysts are already predicting a sub-15-million-tonne crop or even smaller, which would necessitate serious rationing.
While some fields likely lucked out with timely showers, the Prairies on the whole are very dry, with record-high temperatures during the July flowering period seriously harming yields overall. Any rain now will be too little, too late, and could just exacerbate the problem by delaying harvest operations.
Canadian Grain Commission data for the 2020-21 crop year shows combined exports and domestic usage for canola of just over 21 million tonnes, with that total split fairly evenly. The domestic crush will be looking to crush another 10 million tonnes in the new marketing year, which will leave export customers forced to look for other options, as there might only be five million tonnes available for export. Australia and Ukraine could fill that gap.
From a technical standpoint, the November canola contract finished the last trading of July dropping below the 20-day moving average, but has since recovered in early August to move back above that key level. While a retest of the contract highs around C$950 are possible, canola will also take some direction from the Chicago soy complex. Nearby support comes in at around C$800 per tonne, and then again at C$770.
Soybeans lacked any clear direction during the week, with mixed Midwestern weather forecasts keeping U.S. grains and oilseeds on edge. While heat and dryness have also raised some concerns for their crops, the eastern Corn Belt is thought to be in better shape.
The U.S. Department of Agriculture releases a much-anticipated supply/demand report on Aug. 12, with updated yield estimates likely to set the nearby tone for the futures.
The U.S. winter wheat harvest is wrapping up, while the spring wheat harvest is running ahead of normal as the drought conditions led to early development. Meanwhile, excessive moisture in parts of Europe has caused delays for the winter wheat harvest there.