ICE Futures Canada canola futures ran up the biggest daily gain in nearly 2 1/2 years on Aug. 26 as expected sizzling temperatures in the U.S. Midwest threatened to sap soybean and corn yields.
November canola jumped $22.30, or 4.3 percent per tonne, Aug. 26 and has climbed about $66, or 14 percent, from the low on Aug. 6, before concerns about drier Midwest weather began to rally crop futures.
At the start of the week, temperatures across the U.S. crop belt were forecast to top 35 C most days during the week.
Dry conditions are expected to continue over the next two weeks, U.S. weather forecasters said.
December corn closed above $5 a bushel US on Aug. 26 for the first time since July 19.
But soybean futures reacted the most to the hot weather because their supply-demand balance is already expected to be tighter than corn in 2013-14 and because they are in the pod setting stage critical for yield.
While canola futures are riding soybean’s coattails, the rise is muted because the Canadian crop is expected to be record large.
The hot weather north of the border is welcome, pushing the crop toward the harvest-ready state, lessening but not eliminating the risk of frost damage.
The rally Aug. 26 followed solid gains the previous week.
Farm advisory group Pro Farmer sponsored a Midwest crop tour and forecast U.S. soybean production at 3.158 billion bu., with an average yield of 41.8 bu. per acre, three percent below USDA’s current outlook for a crop of 3.255 billion bu., with a yield of 42.6 bu. per acre.
Pro Farmer pegged the U.S. corn crop at 13.46 billion bu., with an average yield of 154.1 bu. per ac.
USDA’s forecast is 13.763 billion bu. and 154.4 bu. per acre.
Large speculators had expected a trend of falling prices and had a net short position in CBOT corn. The situation left the market open to bouts of short-covering, buying back contracts to account for the increasing weather risk.
The USDA on Aug. 26 said 59 percent of the corn crop was in good-to-excellent shape, down two percentage points from the week before.
The soybean crop was rated 58 percent good-to-excellent, down from 62 percent the week before.
The rally in oilseed prices has caught the attention of Brazilian farmers, causing them to likely in-crease soybean acreage over corn when they start sowing in the next few weeks.
Brazilian analyst Agroconsult projected the country’s 2013-14 soybean crop at a record 88.4 million tonnes, up from the 81.46 million harvested early this year.
It projected the country’s 2013-14 corn crop at 76 million tonnes, compared with 80.25 million this season.