It was a bit of a mixed bag in the canola market during the week ended May 4, with old-crop months drifting lower and new-crop contracts steady to higher.
Warm and dry weather across Western Canada allowed farmers to start making headway with spring seeding, with cereals and pulses the first to go in the ground. Farmers are busy on the fields and new-crop production is still facing plenty of question marks, which meant producer hedge pressure was lacklustre at best in the futures. That propped up the deferred months, while the old-crop July contract moved lower.
However, the fact that the crop is being seeded only a few short weeks after snow was still on the ground is probably more bearish than bullish. Acres are expected to be large, while old-crop supplies are also more than sufficient to meet demand.
Both exports and domestic crush continue to run a bit behind the year-ago pace, despite larger supplies to start the season. The simmering trade war between the U.S. and China does have the potential to shift some buying interest up to Canada, but beyond rumours there’s been no actual confirmed business.
Beyond the ebbs and flows of the market, canola traders also received news during the week that clearing and hedging of futures will move to New York by the end of July. ICE Futures Canada will retain a small presence in Winnipeg, but for all intents and purposes the move marks the final end to an era that had been some time in coming. The futures will still be traded in Canadian dollars with the exact same contract specifications, but there will be a new regulatory framework. Traders were holding out their judgment, with the bittersweet loss of a Winnipeg presence countered by the possibility of increased liquidity.
The Winnipeg Commodity Exchange was the first of the North American agricultural markets to move to an all-electronic platform back in December 2014, and was eventually bought by U.S.-based Intercontinental Exchange (ICE) in 2007. While attempts at generating interest in wheat, durum and barley contracts never caught fire, canola’s move to the Big Apple could be seen as a vote of confidence in the market. With no physical trading floor already, the move shouldn’t make much of a difference from traders’ perspective.
U.S. soybean, corn and wheat markets were all trading off of the weather at the start of May. Midwestern seeding conditions have the potential to move beans and corn, while wheat reacts to condition ratings in the southern Plains.
A crop tour of Kansas during the week confirmed yields will likely be down considerably in the key hard red winter wheat-growing state, with any moisture at this point unlikely to improve the outlook.