A common refrain from many analysts was that StatsCan was underestimating the size of last year’s crop
ICE Futures Canada canola contracts moved lower during the week ended May 3, with fund traders liquidating long positions behind much of the weakness.
Overall losses in canola came despite a firmer tone in the U.S. soy complex. The unwinding of spreads between the two markets was thought to be behind some of the relative weakness in the Canadian oilseed. A bounce over the week in the Canadian dollar, which was within a cent of parity by Friday, was also cutting into canola values.
Positioning in the lead-up to Statistics Canada’s stocks report was a feature of the trade for a while, but the data came and went with little overall market impact. Canola stocks, as of March 31, were pegged at 3.9 million tonnes, well behind last year’s level and the tightest for this time of year in nearly a decade. While stocks were a little tighter than many pre-report guesses, the trade was quickly downplaying the number and second-guessing the survey results. A common refrain from many analysts was that StatsCan was underestimating the size of last year’s crop. Conspiracy theories aside, the most likely explanation, as to why the actual canola supplies still out there may not be as tight as the official data, is that farmers — particularly in a tight year — may not be 100 per cent accurate in their survey responses. A few bins unreported here or there add up, and there could be 500,000 more tonnes of canola out there than officially documented. Even if that’s the case, stocks are still tight, and demand rationing of old-crop canola ahead of the new-crop harvest should provide support going forward.
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The overall direction in canola will continue to be dictated by movements in the U.S. futures, with Canada’s own supply-and-demand fundamentals a secondary influence.
Weather in the U.S.
In the U.S., soybeans, corn and wheat all moved higher during the week. Weather conditions remain at the forefront of U.S. grains and oilseeds markets, as farmers struggle with spring seeding and cold temperatures damage winter wheat fields.
Yet another snowstorm caused more problems for some U.S. Midwestern farmers trying to get their corn crops in at the start of May, but forecasts were starting to show some improvement by the weekend. Meanwhile, wheat fields were being hurt by freeze damage in the southern Plains.
The weather forecasts this spring could best be likened to a carrot constantly being pulled farther away. The warmer temperatures always seem to be just a week out. The days are getting longer, and it’s looking like the elusive carrot will finally be caught.
Problem areas will inevitably persist, but the bulk of the crops in both Canada and the U.S. will get in the ground (with only minor adjustments to what’s seeded). Over the seeding period, prices can be expected to chop around, but attention will soon be shifting away from the late planting to the good start the crops are getting given all the moisture out there.
As always, shifting sentiment in the wider financial markets will also come to play in the grains and oilseeds. South American production, Chinese demand and weather in other parts of the world will also remain in the background and be there to move prices around once the dust — or, more likely, mud — settles from spring planting.
