The ICE Futures Canada canola market went in two directions during the week ended April 28, with the July/November spread narrowing in considerably.
Speculators, adjusting positions, accounted for much of the activity during the week, especially in the May contract as traders exited that month before expiry.
The old-crop July contract lost roughly $5 per tonne over the course of the week, while new-crop November gained $7. The July/November spread moved from $28 per tonne over, to about $15 over. That move shows attention to be moving away from the tight old-crop supply situation and to the uncertain new-crop production prospects.
Roughly two million acres are still sitting with overwintered crops in Western Canada, according to provincial estimates, and poor weather continued to cause problems for farmers looking to clean up those fields. Not all of that land is canola, but enough is that the 2016 production number may be revised lower at some point.
The bigger concern now with unharvested crops is what those delays mean for new-crop seedings. Statistics Canada forecast record-large canola acres for 2017, but the rising new-crop futures are a good sign that the market is already lowering its expectations.
While most of the attention is on the supply side of the equation, demand is still looking very strong for canola and prices likely have more room to the upside if that buying interest needs to be rationed.
Canola exports to date, of 8.8 million tonnes, are running about 700,000 tonnes ahead of the previous year’s pace, according to Canadian Grain Commission data. The domestic crush is even more active, with the 6.9 million tonnes crushed to date about 900,000 tonnes ahead of the year-ago level, according to the latest Canadian Oilseed Processors Association data.
Crush margins are off their highs, but did improve over the course of the week as softness in the Canadian dollar provided support.
Statistics Canada releases its stocks as of March 31 report on May 5. While the report is usually not followed that closely, it will provide a better handle on usage to date and the supply situation heading into the new season.
Weather is the key driver in the U.S. markets these days, with corn plantings running behind normal due to cool and wet conditions.
Midwestern farmers usually like to get the corn crop in the ground by May 15, with yield losses likely for any fields planted after that cutoff point. Soybeans have a slightly shorter growing season, and are typically planted after corn. As a result, corn-seeding delays typically lead to a shift into soybeans. While soybean area is already expected to be quite large in the U.S., conditions are shaping up to see even more beans in the ground.
Spring wheat is also facing seeding delays in the U.S., but the bigger weather concerns are for winter wheat. All three U.S. wheat markets shot higher during the week, with freezing temperatures and even snow in some areas causing damage to the already record-low U.S. wheat acres.