Weather issues continued to dominate the price patterns experienced by the oilseed markets located on the ICE Canada platform and the Chicago Board of Trade during the week ended July 27. The price movement in both resembled that of a roller-coaster with the up-and-down movement far from being over.
ICE canola futures lost $36 to $48 per tonne during the reporting period with values coming under downward pressure from the sell-off experienced in CBOT soybeans as well as the overseas oilseed sector. Adding to the bearish sentiment seen in canola were the mainly favourable weather conditions for the development of crops in Western Canada. The start of the canola harvest in Manitoba also was an undermining influence.
Adding to the price slide in canola was the fairly active selling pace of farmers. The pricing of both old and new crop supplies was described as active with elevator companies in turn aggressively placing hedges into the market. Some of the deliveries by farmers came amid the need to clean out bin space, but some may have been spurred on by the sharp drop in the oilseed sector and attempts to still garner a fair cash price for their canola.
Canola bids, depending on the region, had easily been in the $14-per-bushel and higher range at the start of the reporting period, but had eased down into the $11 to $13 range by the time this article was written. A lot of farmers were holding on to canola in hopes of getting $17 a bushel or better and when the sell-off occurred, the decision to move product also quickened.
The strengthening of the Canadian dollar during the week also did not do canola any major favours.
The losses in canola, however, were offset by steady commercial demand and the late-week change in the U.S. weather situation. Rain dominated the early-week outlook for the Soybean Belt, spurring a massive price drop over a couple of sessions. However, by the end of the reporting period, the rain failed to materialize with participants quick to point out that the drought conditions in the U.S. Midwest were the “worst in decades.”
Arbitrage pricing accounted for the movement in values seen in ICE Canada milling wheat futures. No actual trade was seen during the reporting period. Durum and the new barley contracts held steady.
CBOT soybean futures experienced quite the sell-off in the early stages of the reporting period with values unable to recover significantly despite the last-minute concerns regarding the drought.
The taking of profits and the increased chances of rain in the weather forecasts encouraged the downward price slide seen in soybeans. Losses in CBOT soybeans ranged from US41 cents to as much as US86 cents per bushel.
The price declines were slowed by the need to ration demand given that the processing pace of soybeans in the U.S. remains at a high level and export demand for the commodity continues to remain strong.
Lowered yield potential
Late-week estimates from private analytical firms, lowering the yield potential of U.S. soybeans, further restricted the price declines.
It is also interesting to note that some firms were expecting soybean futures in the U.S. to top 20 cents a bushel, especially if the crop fails to receive much needed precipitation during the critical pod-filling stage in August and if temperatures remain in the scorching category.
Corn futures on the CBOT also suffered declines during the week, with the losses in soybeans and the arrival of rain spurring the downward price move. Profit-taking and chart-based liquidation orders helped to augment the price weakness.
The drop-off in demand from the U.S. livestock and ethanol sectors also encouraged some of the decline.
However, here too the late-week revised weather outlooks, calling for continued hot and dry conditions in the U.S. Midwest, tempered the sell-off. Yield estimates for corn from the private firms were said to be down significantly from average levels.
Wheat futures on the CBOT, MGEX and KCBT generally lost ground during the week with spillover from the declines in CBOT corn fuelling much of the price slide.
Pickup in demand
Reports that the spring wheat harvest in the northern-tier U.S. states was underway, with yields coming off well above early expectations, further depressed prices.
The losses in wheat were restricted by a pickup in demand from the U.S. livestock sector and as world wheat production estimates continued to be lowered by varying weather issues.
There is little debate as to what will continue to influence prices in the Canadian and U.S. futures markets moving forward. The weather continues to be the main focus and knowing the daily forecast for the U.S. Midwest will remain a top priority among market participants.
Canola production on the Canadian Prairies had been expected to be above average, but there have now been some rumblings that yields in select regions were not meeting expectations. As for whether these rumblings are fact or fiction is still up for debate.
I have heard that winter wheat yields in various locations across Manitoba are easily hitting over the 100-bushel-per-acre level, which is considered to be above average. These crops were also coming off with great test weights and have been relatively disease free.