Canola futures fell hard during the week ended March 8, hitting their lowest levels in more than two years as concerns over Chinese demand came to the forefront.

Over the past few months, rumblings that Chinese demand was waning and Canadian exporters were facing extra hurdles moving canola to the country had been growing louder. Business has dropped off following the arrest of Huawei executive Meng Wanzhou at the beginning of December.

While the issues with China were generally common knowledge amongst traders, reports that Richardson International had been denied the official registration to sell canola into the country brought the story to the top of newscasts across Canada. With the rumours now a reality, futures prices took a tumble as speculators added to short positions and other players bailed out of long positions.

May canola settled at $457.30 per tonne on March 8, having lost roughly $30 per tonne over the past month. The contract briefly traded below the psychological $450-per-tonne mark during the week, but managed to settle above that support level.

The Canadian dollar also fell relative to its U.S. counterpart during the week, while the losses in soyoil at the Chicago Board of Trade were much more subdued. As a result, crush margins improved to some of their best levels in years. The solid margins should keep domestic processors showing good demand, although large old-crop supplies may limit any strength in the cash market.

Canadian canola ending stocks for 2018-19 are currently forecast at 2.5 million tonnes by Agriculture and Agri-Food Canada, but some analysts think the carry-out could top three million tonnes. In addition, the trade issues and declining prices may not even do much to dissuade canola acres in 2019-20, as many other cropping options are not much better.

In U.S. grains and oilseeds, trade issues with China are also at the forefront of the market talk, although the outlook is generally a bit more positive. While sentiment is constantly shifting and nothing is on the books just yet, there generally is optimism that a trade deal will eventually be reached.

However, with a timing of a deal very much in question, attention is shifting to the South American harvest, with soybean and corn crops there competing in the global market.

Spring seeding is also not that far off in North America. One thing to watch over the next few weeks will be weather in the U.S. Midwest. Heavy snow this winter has raised some concerns over flooding and a late start to planting. Late seeding in the U.S. typically sees some acres shift out of corn and into soybeans, which would weigh on bean prices and buoy corn as the two crops compete for acres.