As weather pandered to both sides of the markets this week, there wasn’t much change to canola values. There was something of a balancing act between dry conditions continuing to underpin values and significant rainfall on the Prairies providing pressure.
For example, the November contract on June 4 closed at $763.60 per tonne, gaining nearly $20 that day. When trade wrapped up at ICE Futures on June 10, November canola stood at $761.30 per tonne. Overnight rains then saw new-crop prices take a tumble on the morning of June 11.
Rain came down last week on the three Prairie provinces — Alberta first, followed by drought-stricken Saskatchewan and Manitoba. More rain was present across the region as the week wrapped up.
Crops across much of the region had been getting quite dry, which meant this week’s rains were more than welcome — to those who received enough, that is. For example, there was a strip across southern Manitoba in which two to three inches fell, but in parts of the province outside that swath it was a different story. Scant amounts of moisture were received, which left crops to struggle further in very dry conditions.
Although there were a few examples of flooding this week, such as at Carman, there were questions about the all-important soil moisture levels, which were critically low. There are really no reserves left farther down in the soil for crops to tap into, which might not bode well come harvest time. If crops were to struggle throughout the summer for a lack of more timely rains, obviously yields will be down, as would crop quality. Given still-tightening canola stocks, there would be little hope of replenishing those stocks to adequate levels. More than ever, a good crop is needed to come off the Prairies and it’s not helping when Mother Nature teases farmers with lengthy gaps between rains.
The moisture that has been received was enough for markets to drive down canola prices by removing a fair bit of the weather premium.
Weakness in the Chicago soy complex also did its part to pull down canola prices at the end of the week. Increases in the complex, especially soyoil, provided support to canola. The complex has since dropped, taking canola prices with it.
However, if dry conditions return to the Prairies, then canola prices would likely swing back upward.