ICE Futures Canada canola contracts moved lower during the week ended Oct. 4, and the November future settled only about $5 per tonne higher than the contract low of $472.40 per tonne.
Canola futures were looking like they would end the week higher, as traders were covering short positions due to ideas that Statistics Canada wouldn’t show the full size of the canola crop in its report.
Values moved lower, though, following the release of StatsCan’s report, as the speculative buying dried up. The report was neutral for the market, as StatsCan pegged Canadian canola production for 2013-14 at 15.96 million tonnes, which fell in line with expectations between 14.8 million and 17.5 million.
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Continued pressure from advancing harvest activities was a bearish influence during the week, though there were some delays due to wet, rainy weather in all three Prairie provinces.
But with improved weather forecasts for the second week of October, harvest should be back in full swing, which will likely mean canola prices continue to drift lower.
It’s also expected the actual size of the Canadian canola crop will be even larger than StatsCan’s latest estimate, due to reports of record-large yields in many regions.
There is still strong demand for the Canadian canola crop out there, but the crop is expected to be so large that the path of least resistance in canola is still pointed lower.
Values haven’t hit a bottom yet, and it is expected that they could drift down to the $450-per-tonne level before seeing a corrective post-harvest bounce.
Soybeans down
Though all of canola’s own fundamentals and technicals are important and will help dictate what happens in the market, it will ultimately continue to follow the action in Chicago soybean futures.
Chicago soybean futures moved lower during the week, with harvest pressure and reports of better-than-expected yields in the U.S. undermining values.
The path of least resistance for soybeans is lower and prices could move as low as US$11.75 per bushel before the end of harvest. Once the entire crop is in the bin, traders will start focusing on export demand for soybeans and the South American crop.
Expectations that export demand for U.S. soybeans will be robust for the first half of the crop year will provide some measure of support. But South America is also expected to grow a record-large soybean crop, with Brazil anticipating to produce more soybeans than the U.S. for the first time ever.
Chicago corn futures were weaker as well and will likely drift down to US$4-$4.25 before seeing some recovery due to continued harvest pressure weighing on values.
Wheat in demand?
All three U.S. wheat futures, including the CBOT, MGEX and KCBT, bucked the trend and moved higher during the week. Talk that export demand for U.S. wheat continues to be strong helped to support prices, though with the U.S. government shutting down, it’s difficult to know how much actual demand there has been recently.
The U.S. Department of Agriculture closed as part of the U.S. government shutdown, which meant no weekly export sales report was released during the week. If the shutdown is short lived, it won’t have a big impact on markets. But if it lasts more than a couple of weeks, there could be some volatility once USDA is back up and running, as it will likely release a slew of reports all at once.
Gains were limited in U.S. wheat futures by confirmation of a very large Canadian wheat crop in StatsCan’s Oct. 4 crop production report. StatsCan pegged all Canadian wheat production for 2013-14 at a record-large 33.03 million tonnes, up from its previous estimate of 30.56 million and 27.21 million in 2012-13.
