ICE Futures Canada canola contracts saw some mixed activity ahead of the Canada Day long weekend, as a number of outside market factors spilled over to provide conflicting direction.
Overall, new-crop canola contracts were all lower during the week ended June 27, while old-crop July climbed higher. The activity in the front month was tied to participants holding short positions exiting the contract before being forced to make deliveries of canola they don’t have.
Aside from the last hurrahs of the old-crop canola, attention in the market is now firmly on new-crop production prospects. Statistics Canada released its updated acreage estimates during the week, pegging canola area at 19.7 million acres. That was up from early intentions, but still behind the 21.5 million seeded the previous year.
Read Also
New crop insurer policy enables easier startup for faba beans
Agriculture Financial Services Corporation updated its normals for faba beans, which may open the door for more Canadian producers to feel comfortable growing the pulse crop in the future.
Industry participants found little to question in the StatsCan numbers, as the official number actually fell in line with trade guesses for once. With the acreage base down on the year, and with old-crop supplies looking very tight, yield prospects will be a hot topic heading through the growing season. Excessive moisture and other weather issues have already caused problems in some areas, but most anecdotal reports point to large crops at this early stage. Good conditions may keep the path of least resistance to the downside, although the tight supplies will heighten any weather related scares that materialize.
Movements in the U.S. soybean market also have the potential to pull canola one way or the other. Early crop prospects are also looking good in the U.S. but, just as in Canada, there are also areas of concern to watch. While soybeans were a little firmer over the past week, soyoil was down sharply. Canola has a higher oil content compared to beans, and softer vegetable oil markets weighed on Canadian prices.
Activity in outside financial markets, including the continued weakness in the Canadian dollar, can also be expected to remain a factor in canola. Continued weakness in the currency does make exports more attractive for international customers. However, those international customers are also dealing with the general sense of financial uncertainty that caused the sell-off in the currency and economic concerns abroad may also cause some demand to back away.
In the U.S., wheat was down, corn was mixed and soybeans were mostly higher during the week. Positioning ahead of updated acreage and stocks reports released by the U.S. Department of Agriculture on June 28 was a feature in the U.S. markets. Old-crop soybeans found themselves in a similar situation as the canola market, with tight supplies and short-covering ahead of deliveries pulling the front month higher. The gains were much more subdued in new-crop months as relatively favourable U.S. crop prospects tempered the upside potential.
Corn also managed to see some modest strength in the front month, but was down in the new-crop contracts as improving production prospects were thought to be more than making up for the fact that some intended corn acres likely didn’t get in the ground this year.
For wheat, prices were down in all three U.S. futures markets, with the largest declines in Kansas City and Chicago as farmers in the southern U.S. Plains move forward with the winter wheat harvest. While there have been some reports of disappointing yields, the advancing harvest pressure was enough to keep the bias to the downside.
However, losses in Minneapolis spring wheat futures were a little more subdued as continued wetness in some wheat-growing areas of North Dakota likely limited the acreage base.
Canadian wheat area was pegged at 26.2 million acres by StatsCan on June 25. That was down from an earlier guess, but still well above the 23.8 million seeded in 2012. Of that total, durum area came in 4.9 million acres, from 4.7 million the previous year. All other spring wheat was up by over two million acres on the year, with acreage estimated at 19.1 million acres, from 16.9 million in 2012.
