Canola demand might be booming, but its recent price couldn’t escape the effects of a negative U.S. production report and a rising Canadian dollar.
Canola exports in the week to Nov. 5 were 470,200 tonnes, the largest one-week movement for the oilseed ever.
The total exported in the first 13 weeks or one quarter of the crop year is 2.86 million tonnes, up 25 percent over last year at the same time.
The record canola exports in week 13 were accomplished even as Canadian National Railway struggled to recover from the derailment during severe winds at a bridge near Wainwright, Alta., which closed its main line for several days in October.
Demand is also good on the domestic front. Canola crush for the year to Nov. 8 was 2.45 million tonnes, less than one percent behind last year’s record campaign, and the pace has been picking up in recent weeks, narrowing the gap with last year.
If this pace can be sustained, it would normally help lift canola prices.
However, canola dipped a little in the days following the U.S. Department of Agriculture’s November supply and demand report issued Nov. 9. The report was negative for prices.
The trade had expected that the USDA would lower its soybean yield estimate, but it kept it steady at 49.5 bushels an acre.
Also, the USDA raised its corn yield more than expected, by 3.6 bushels to 175.4 bu. per acre, a new record.
Total corn production was pegged at 14.58 billion bu., up from 14.28 billion last month.
January soybeans were down about 2.5 percent Nov. 13 as this column was written, compared to the price before the report.
That is not a momentous price move, but in a market dominated by complacency and trading in a narrow range since early September, it was noteworthy.
Soybeans also felt downward pressure as rain reached dry areas of Brazil where the soybean crop is being seeded.
The soybean price decline weighed on all oilseeds, including canola.
Also, the loonie was trading around US78.5 cents Nov. 13, up about a half cent over the week, and that too weighed on canola.
The canola market will likely resume trading in a narrow range until the next potential market-moving news, which will be the Statistics Canada production report expected Dec. 6.
The trade generally expects a canola production number of 20 to 21 million tonnes.
Any surprises above or below that range would change the canola market price trend.
I’d be surprised if Statistics Canada shocked the market. Unlike last year when so much canola was still in the field when winter snow settled in, the canola harvest went well this year except in northern Alberta. And even there, farmers got most of the crop off before snow finally forced the combine into the shed.
I believe that we are destined to plug along with prices continuing to move in only a narrow range, influenced mostly by changes in exchange rates.
The only potential disrupter to that from a supply-demand viewpoint would be the development of a major weather problem in South America. And so far, although weather in Brazil and Argentina is not ideal, neither is it a disaster.