ICE Futures Canada canola contracts moved lower during the week ended Wednesday, as values continued to be pressured by ongoing harvest activities in Western Canada.
Farmers across the Prairies made fairly good harvest progress during the week, with beneficial weather in many areas. Good yields continued to be reported, and it is still expected the crop will be larger than the most recent Statistics Canada estimate of 14.7 million tonnes.
An increase in farmer selling off the combine, as producers are worried about not having enough bin space for the crop, was also an undermining price influence, and should continue to pressure values going forward.
“We have a congestion problem, and then we have a weakening global vegetable oil market too,” said Errol Anderson of ProMarket Communications in Calgary. “So, I think the futures will angle into fresh contract lows.”
The market still has the potential to continue moving lower because the very large canola crop that’s currently being harvested in Western Canada isn’t fully priced in yet. That’s mostly because the actual crop will probably be quite a bit larger than what Statistics Canada estimated in its August production report, Anderson said.
“The (Canadian canola) crop is probably closer to 16 million tonnes,” he added. “So we’re sort of a million tonnes out of sync between the trade estimates and the government estimates.”
Once the Prairie harvest starts to wrap up, canola prices could experience a slight bounce as farmer deliveries slow down, but it will all depend on whether elevators can secure rail cars.
Canola isn’t the only crop that is expected to see record, or close to record, production this year, which means there will be strong competition for rail cars this fall, Anderson said.
— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.