ICE Futures Canada canola contracts moved up and down during the week ended Dec. 7, finishing only a little bit firmer overall.
The $600-per-tonne level was the key chart point to watch in the nearby January contract, as the futures made a brief attempt to climb above that psychological level before backing away. If the futures manage a sustained move above that point, the next resistance comes in around $620 to $625 — which was last seen in late October. On the other side, support can be found at the $575 to $580 area.
Statistics Canada released its final production estimates of the year on Dec. 5, providing the industry with the official numbers that, right or wrong, will form the basis for any supply/demand predictions going forward. At about 13.3 million tonnes, the crop may be the second largest on record, but is still considered incredibly tight given the changes in the canola industry over the past few years. The domestic crush capacity has grown considerably larger, while international demand also continues to improve.
Milling wheat futures did see some contracts trade during the week, but the activity was largely a function of participants with positions in the December contract either bailing out of the front month, or rolling those few contracts into the March futures.
Durum and barley lacked any real activity, and held steady on the week.
In the U.S., soybeans were higher during the week, while corn and wheat were lower in the most active contracts. The key difference between the grains and soybeans came in the form of export demand: China is still looking to buy more beans, but interest for U.S. corn and wheat remains lacklustre at best.
The U.S. sold over a million tonnes of soybeans in the latest weekly data, but fewer than 50,000 tonnes — or only one boatload — of corn during the same period. The demand rationing of corn is causing supplies in the countryside to build up, reducing some of the concerns over tightening supplies.
South American weather issues helped boost soybeans as well, as heavy rains in Argentina highlighted concerns over planting delays for the crop. However, long-range forecasts point to improving conditions in the region, with the weather expected to turn drier in Argentina, while Brazil should see some much needed rain. Traders will continue to follow the weather news out of the continent closely, as end-users are counting on record-large South American crops to alleviate any tightness in the U.S.
For wheat, StatsCan raised its production estimate for this past year slightly, while reports out of Australia were pointing to a smaller crop than earlier forecasts. Canadian wheat production, including durum, was pegged at 27.2 million tonnes by StatsCan, which was up by about 500,000 tonnes from an earlier estimate and about two million tonnes larger than the 2011 crop. Australia, meanwhile, saw its crop prospects revised lower by 500,000 tonnes during the week.
With the outside wheat news largely a wash, U.S. futures continue to trade off of the conflicting factors of poor export demand but rising drought concerns. Much of the U.S. Great Plains remain very dry, and that lack of moisture will cut into the prospects for the winter wheat crop currently in the ground. However, U.S. exporters seem to be having a hard time selling the wheat they do have in the international market, as the country continues to miss out on tenders.
Canadian wheat export data is not as timely as that out of the U.S., but the latest numbers from the Canadian Grain Commission show wheat exports are relatively in line with last year’s levels. Excluding durum, Canada has exported 4.3 million tonnes of wheat to date, only about 200,000 tonnes behind the previous year’s level. Durum sales are up on the year, with 1.6 million tonnes exported as of Dec. 2; that’s about 400,000 tonnes ahead of what was seen during the first five months of the 2011-12 crop year.