ICE Futures Canada canola contracts chopped around within a wide range over the course of the week ended Dec. 1, but finished that Friday on a soft note.
The late weakness in canola was a direct result of a rally in the Canadian dollar. The currency itself had been under pressure for most of the week, but shot higher on some surprisingly solid domestic jobs data from Statistics Canada.
Grain markets were also positioning themselves ahead of another Statistics Canada release, with the final production estimates of the year out on Dec. 6. That report could provide some sparks for the market if there are any surprises.
Most industry participants expect actual canola production will end up above the September estimate of 19.6 million tonnes, but the extent of that revision remains to be seen. Anything between 20 million and 20.5 million tonnes would be considered market neutral for canola, but larger or smaller crops could provide some nearby direction for canola separate from the U.S. futures.
From a chart standpoint, the January canola contract fell below the 100-day moving average on Friday, Dec. 1, to settle at $506.10 per tonne. While a correction back above that level is possible, the next downside target comes in at the 200-day average around $503 and then at the psychological $500-per-tonne mark.
In addition to the bearish technical signals, large supplies in the commercial pipeline could limit any bounce in canola from a fundamental standpoint.
While both the export and domestic crush pace continue at a steady clip, western Canadian farmers made solid deliveries of over 400,000 tonnes of canola during the week ended Nov. 27, according to the latest report from the Canadian Grain Commission. With visible supplies of over 1.4 million tonnes, end-users have little reason to be bidding up the futures.
In the U.S., both soybeans and corn started the week lower before eventually uncovering some support to move off nearby lows.
With the U.S. harvest wrapped up for the most part, seasonal price trends should lend support to the grains and oilseeds heading into the new year. Attention is also now firmly on crop conditions in South America, where the next soybean and corn crops are just getting started.
For wheat, fresh contract lows were hit in the Chicago and Kansas City winter wheat futures, while Minneapolis spring wheat fell to its softest levels in months. However, support was uncovered at the lows, with U.S. wheat starting to look a bit more attractively priced on the global market. Production issues in Australia were also starting to generate some talk in the market.
Statistics Canada’s wheat production estimate has the potential to provide at least some short-term direction for U.S. futures.
Trade estimates on the size of Canada’s all-wheat (including durum) production range from 27 million to 29.5 million tonnes, which would compare with the previous StatsCan estimate of 27.1 million. While most market participants expect an upward revision, the crop will still come in well below the 31.7 million tonnes grown last year. Tighter Canadian wheat stocks could be a bit supportive for prices, but large world supplies should remain burdensome overall.