After trending higher for all of June, the ICE Futures canola market finally ran into resistance as the calendar officially switched to summer.
Weather was at the forefront of all the North American agricultural markets, closely followed by a much-anticipated biofuel announcement from the U.S. Environmental Protection Agency.
From a chart standpoint, the new-crop November canola contract managed to hold above the psychological $700 per tonne level during the week, but faced resistance on any attempts at moving much above $720.
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The EPA’s Renewable Fuel Standard production targets for 2023-25 were finally confirmed, establishing the volume requirements for various renewable fuels over the next three years. The targets for biomass-based diesel, which would include biodiesel made from soyoil, were raised from the preliminary numbers announced in December, but came in well short of the five billion-gallon per year target that industry participants had hoped for.
Soyoil futures dropped their four-cent daily price limit as a result but did manage to claw back some of those losses as the week progressed.
The question now is whether the biodiesel industry will grow to the same extent as had been expected in the U.S. if the government mandates aren’t there. Canada’s canola industry is also looking to an increase in demand from the biofuel sector, with several projects in the works, but time will tell what comes of those plans.
While soyoil was knocked down by the EPA news, soybeans themselves were underpinned by declining crop ratings across the U.S., as hot and dry weather was thought to be hurting early development.
The U.S. soybean crop was rated only 54 per cent good-to-excellent as of June 18, losing five points from the previous week. Canola found some underlying support from those concerns, but Canada’s crop was in generally better shape overall despite pockets of concern.
Corn condition ratings were also falling in the U.S., with only 54 per cent of the crop hitting the good-to-excellent category as of mid-June. The chance of rain was enough to take some of the edge off the market, but if moisture fails to materialize, there could easily be more room to the upside.
For wheat, the U.S. winter wheat harvest is starting to come off, but untimely rains caused delays. Meanwhile, production cuts in Russia, along with uncertainty over the continuation of the Black Sea grain export corridor, kept additional caution in the market.
Spring wheat fields in both Canada and the northern U.S. received timely rains during the week but will need more moisture through the growing season. U.S. spring wheat ratings were down nine points in the latest report at only 51 per cent good-to-excellent.
One analyst spoken to during the week described July and August as “the Super Bowl of talking weather,” with not much likely to take market focus away from meteorological predictions for the time being.
