March canola hit a session high of C$649.70 per tonne on Feb. 4 — its highest level since mid-November — as U.S. tariffs that had been set to go into effect that day were postponed for at least a month.

“There’s a lot of uncertainty hanging over the market,” said Ken Ball of Ventum Financial in Winnipeg, pointing to the lingering tariff threats and uncertain outlook for the U.S. biofuel sector as factors that would be keeping some caution in the futures trade.

“Chaos, uncertainty and threats of aggression are what Trump does,” said Ball adding that “given the path of destruction that Trump is on … the industry is becoming increasingly concerned that he’ll eradicate the biofuel industry.”

While the traditional supply/demand fundamentals have largely taken a backseat to tariffs and geopolitical issues, the release of Statistics Canada stocks data on Feb. 7 could provide some nearby direction for canola. Ball said the stocks as of Dec. 31 numbers will provide a report card on production and usage data, with both exports and the domestic crush running at a solid pace.

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On Aug. 20, AAFC issued its monthly supply and demand estimates which showed the feed waste and dockage for 2023/24 canola at a mere 74,000 tonnes. That’s a drop from the 692,000 tonnes in 2022/23 and that for 2024/25 was projected to be 347,000 tonnes.

“Everybody is looking at that [2023/24 number] saying where did they get that from?”, Ball stated, noting the end of season stocks report could clarify AAFC’s data. He called the stocks report a sort of “a report card on other reports.”

“That feed waste and dockage number is a little bit of a warning that there’s more canola out there than we think,” the broker added.

As for StatCan’s upcoming report on principal field crops, Ball commented there’s little reason to put any faith into the document.

“I don’t know anybody who has a great amount of faith it’s going to tell us very much,” he said. “Data gathered at the end of July…how a non-surveyed report could take a month to get out? It will give us a limited amount of information.”

“The confidence level in these model reports is still extremely low in the industry,” Ball continued.

In turn that has created a situation where no one really knows how much canola will come off of Canadian fields in 2024/25. Currently, AAFC pegged production at 18.63 million tonnes, based on data from StatCan. Some analysts and traders suggested the crop could reach or exceed 20 million tonnes, but dry weather at the blooming stage may have eroded that expectation. Meanwhile, the United States Department of Agriculture estimated the coming Canadian canola harvest at the 20 million-tonne mark.

As for the pending labour dispute at Canadian National Railway and Canadian Pacific Kansas City, Ball suggested canola prices could go either way. He said pressure from domestic buyers could pulled prices lower. However, should export demand suddenly spike, that could drive up values.

Federal Labour Minister Steven MacKinnon met with CN, CPKC as well as the Teamsters Canada Rail Conference on Aug. 21 in a last-ditch effort to stave a work stoppage that was set to begin at midnight.

Should a strike by the Teamsters’ 9,300 members proceed, or the railways lock them out, it would mark the first time CPKC and CN were brought to a halt at the same time. Reports estimated the stoppage could cost the Canadian economy approximately C$1 billion per day.

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The November contract hit a low of C$565.50 per tonne during the week, before oversold sentiment came forward and profit-taking helped take values off that chart support.

If prices drop below the weekly low “that opens the door for (a move to) the 2018 to 2020 price ranges… which is not that long ago,” said Jamie Wilton, Commodity Futures Specialist with RJ O’Brien in Winnipeg.

The nearby canola futures held within a relatively sideways trading range during that timeframe of about C$430 to C$540 per tonne, and Wilton said it was still much too early to say that the lows were in for canola at current price levels.

He added that pressure was coming from the favourable state of the U.S. soybeans, with the bottom of the market often found just ahead of harvest. Looking forward, Wilton expected the market would be paying close attention to how yields come in at harvest time to see how the reality matches up with the predictions.

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The November canola contract lost C$23.10 per tonne in that span, while September Chicago soyoil was down by 1.29 U.S. cents per pound.

Ken Ball of Ventum Financial Corp. of Winnipeg said it was a matter of canola prices following the lead of vegetable oils, especially Chicago soyoil.

“Canola did build in a C$50 to C$60 (per tonne) premium during those bad weather stretches in July, but nobody was sure whether to build onto that or not,” said Ken Ball of Ventum Financial Corp. of Winnipeg, adding “it has largely just been following the vegetable oils.”

He said the trade is waiting until the size of this year’s canola crop in Western Canada is determined, which will be another price indicator.

“Nobody’s really too sure how big the crop is. We’re just waiting to see how the crop develops in August,” Ball said.
Canola conditions in Western Canada were very variable, according to him, ranging from 50 per cent losses reported in parts of Alberta to good to excellent conditions in Manitoba.

While weather could still have an effect on the canola crop, swathing has already begun in some canola fields. As a result, movement in vegetable oil prices will have the greater effect in the canola market.

“There’s chatter in the U.S. they might try to block out non-domestic sources of feedstocks for the biofuel industry. If that ever happened, (soyoil) would rally dramatically, but it’s been talked about for months and months,” Ball said.

If Statistics Canada reported this year’s canola crop at 18 million tonnes in its principal field crop estimates later this month, there will be an adequate supply with stocks drawn down according to Ball. At 17 million, there “would be a problem.”

But with corn, soybeans and wheat moving lower, Ball said there could be more downside for canola yet.
“It wouldn’t surprise me to see (canola) go a bit lower. The 40 U.S. cents per pound soyoil could hold, but it wouldn’t surprise me to see it go to 35 if it doesn’t get any news to support it,” he said.

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While the November contract gained C$6.20 per tonne during the day of July 31, the price was still down C$47.70 from the week before at C$623.90.

Winnipeg-based analyst Bill Craddock said that an influx of funds selling canola short brought the oilseed down in the midst of bearish yield projections. Weakness in the Chicago soy complex also contributed to canola’s losses.

However, he was a bit nonplussed as to why the oilseed was trying to make a recovery. Nevertheless, he believes crop conditions could be the cause.

“We lost crush value after (canola was) the lowest in quite some time. I’m not quite sure what the rationale (was),” Craddock said. “I really don’t see anything other than the (canola) crop might not be as great as people think it is … Canola is still looking good, but the majority of the fields are green. But there are still some fields that are 20 to 30 per cent flowers.”

Craddock also observed that early canola fields seemed to withstand excess moisture much better than late fields.
He doesn’t think there will be much upside for canola prices in the coming days, as he maintained that canola was still overpriced.

“My opinion is that it will be C$40 per tonne lower when it’s closer to harvest,” Craddock said.

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While the November contract fell below C$600 per tonne on June 26 for the first time since late February, it has since gained more than C$50 to close at C$652.70 on July 3. Earlier that day, the contract reached C$659.70, its highest level since June 7.

Jerry Klassen of Resilient Commodity Analysis in Winnipeg noted that canola’s recent rise largely had to do with Chicago soyoil. Over the past week, August soyoil gained almost five U.S. cents per pound at 48.64, a price unseen since April.

He called it a “bean oil scare rally”, which was triggered after Indonesia said it would consider 100 to 200 per cent tariffs on Chinese goods. This could lead China to retaliate in kind towards Indonesian palm oil and perhaps buy more from Malaysia.

“You have a real uncertainty here over the tariffs from some larger vegetable oil exporters and that’s caused the soyoil to have a pretty good rally here over the last few days,” Klassen said, adding that spec funds covered some of their shorts for soyoil due to the tensions.

Managed money shorts for canola totaled more than 139,000 contracts at the end of May and soyoil’s surge created new short-covering and commercial demand for the Canadian oilseed, according to Klassen.

“Last week, we saw a pretty good source talk of new export business for Canadian canola. Then this week after (Canada Day), we had the tariff scare driving the soyoil and then we have fund buying for the soyoil and the canola,” he said.

Klassen mentioned that weather conditions were “optimal” for Western Canadian canola, but soybeans in the U.S. “need a little bit more heat.”

Due to the potential for high canola yields this summer, Klassen believes November canola will face resistance at C$660/tonne. He put the chances of the contract exceeding that level at “50-50.”

“There’s good hedge pressure that’s kind of limiting the upside,” Klassen explained. “We have a big crop coming. This is a temporary vegetable oil scare in regards to trade and tariff structures … The farmers are just pouring (old and new crop canola) out here. We have big selling coming up from farmers.”

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“We have been in a range in canola since the beginning of the year. The November contract started around $680 [per tonne], dropped to $600, and we moved up to $680. Now we’re down to $600,” explained David Derwin, commodity portfolio manager for Ventum Financial in Winnipeg.

He added that canola overall has lost about C$100 per tonne just in the last month.

“It’s like an elastic band. You can only pull it down so far before it snaps back a little bit,” Derwin said.

But for that to occur, he said canola must breakout of its sideways range, with the new crop November contract finding support at C$600/tonne. He explained that movement upward or downward would be preceded by a period of sideways trading.

“It would be reasonable that probabilities would suggest we could in a wide range,” Derwin noted.

However, if canola were to rise again Derwin believes it would top out this time at C$650 to C$660/tonne, noting there are a lot of ifs involved.

Most importantly he pointed to the weather, in which cooler than normal temperatures on the Prairies combined with ample amounts of rain have slowed canola’s development, as well as that for other crops.

While canola remained largely in good shape across the region, the crops are in a weather market. Conditions that pose a threat to the crop would help to generate price increases, vice-versa if the weather were to improve.

“With any type of higher movement that does develop, whether its $50 or $60, producers should be very much ready to make some sales,” Derwin said.

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“Our technical picture looks to be soft, our crop conditions look pretty decent, so we’re suffering from improving fundamentals in crop production expectations,” stated Tony Tryhuk of RBC Dominion Securities in Winnipeg.

“We’re also suffering from a lack of fresh demand. There were no boats on the latest export line to China,” he added.

Even with Statistics Canada set to issue its acreage estimates on June 27, Tryhuk said the report likely won’t make much of an impact on canola futures. Rather he said any yield forecasts would have a greater influence on the direction canola takes.

The previous StatCan report placed canola acres for 2024/25 at 21.39 million, based on surveys completed by farmers in December.

“We did experience a price rally during the key February to May period that I thought attracted a few more acres. I don’t think it’s going to make a material change,” Tryhuk said, noting he expects only a minor revision to StatCan’s acreage data.

“The critical thing the trade is going to be looking at is going to be yields. That’s going to be the biggest driving factor,” he added.

Tryhuk stated canola in its key growing areas in Alberta and Saskatchewan are in good shape at this point.

“So the yield is certainly robust in this early stage,” he said.

There are some parts of the Prairies that are a little problematic due to wet conditions, with one Tryhuk pointed out being Manitoba’s Interlake region.

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“The seasonal peaks are already in,” said senior analyst Mike Jubinville of MarketsFarm, adding “we’ve tested the upside, and we may test the downside unless we run into some crop adversity in the weeks to come.”

The November contract hit a session high of C$696.70 per tonne on May 29, but was more C$50 off that high a few days later settling at C$642.00 on June 5. Jubinville expected a retest of the highs was unlikely in the short term without any outside influence, with values instead flirting with major downside support.

“I can’t see any reason why we would rally,” said Jubinville, adding that “C$640 (per tonne) on the November is an important area to hold.”

However, while canola may trade within a wide range through the growing season, Jubinville noted that Canadian canola was looking more attractively priced for global buyers with China thought to already be in the market making new crop purchases.

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“The market is sensing the Bank of Canada is going to cut rates [on June 5]. So that could be a pressure point on the Canadian dollar. I wouldn’t be surprised if the loonie slides below 72.5 U.S. cents towards 72 cents. That would be support of canola,” Anderson explained.

He added that the current increases in canola on the Intercontinental Exchange have been tied to Malaysian palm oil, which is in short supply.

As well, other reports stated that reduced rapeseed output in the European Union and Russia due to unfavourable growing conditions, including frost, has lent a boost to canola.

Anderson commented there may soon be a need for the BoC to lower its key rates – but in a manner that won’t help canola.

“I’m starting to hear cracking sounds around the stock market. Whether this develops is unknown,” he said, noting the equities recently hit record highs. “There are signs in the treasury market that indicate a pullback may be coming.”

Should the equities falter, Anderson said that would weaken the commodities market. That could lead West Texas Intermediate crude oil to falling below US$70 per barrel, which would put pressure on Chicago soyoil and ICE canola.

While the BoC, the European Central Bank and numerous central banks in other countries have or are leaning towards rate cuts, Anderson said the major outlier is the U.S. Federal Reserve. He pointed out the Fed’s message has been rather mixed by alluding to cuts, holding rates steady, or increasing them.

“We’re one stock market crack away from rate cuts. They’ll have to make a move,” he commented about the Fed.

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