Chinese tension’s effect on canola uncertain

Continuing lack of trade data from the U.S. Department of Agriculture due to government shutdown also worries market

At first glance it seems quiet in the ICE Futures canola market. It’s winter, cold out and there’s not much happening. But below the surface it’s more than meets the eye.

The ICE Futures canola market finished the week of Jan. 18 slightly higher after dipping during the middle of the week. The Chicago Board of Trade soy complex also dipped during the week but ended on a high note.

All throughout the week little bits of news swirled.

In Canada, political tensions continued to mount with China and hit a new high when a Canadian was sentenced to death over drug smuggling charges in China. Many mused this was part of China’s retaliation for the arrest of Huawei’s chief financial officer in December.

The grain trade had been wondering for weeks if the Canada-China tensions would roll over into the canola market, and in the last few weeks traders have started to link it together. Weekly data from the Canadian Grain Commission has shown exports are down this year compared to last, and many traders muse China has slowed down on canola purchases due to the ongoing political tensions between the countries.

When grain companies were asked, it quickly became apparent many were leery to say anything for fear of rocking the boat and damaging purchases of canola even more. Most of the companies admitted purchases were down but wouldn’t directly tie it to China, instead skirting around the fact.

In the United States, there really isn’t any news, well at least if you’re looking for news from the U.S. Department of Agriculture. With the partial government shutdown now being the longest shutdown in history at more than a month, the lack of data is becoming dire. As trade war news continues to dominate headlines, the grain trade is finding itself sitting back with its fingers crossed that China has actually purchased U.S. soybeans.

In trade war news, the week saw conflicting reports from Washington. Earlier in the week, hopes were dashed after U.S. Trade Representative Robert Lighthizer said little progress had been made with China during the trade talks earlier this month.

Later in the week, though, news came out that U.S. Treasury Secretary Steven Mnuchin had proposed lifting the tariffs on Chinese imports in an effort to speed up negotiations. And to end off the week, news emerged that China had pitched a deal to the U.S. that would see the trade deficit gone in six years. So it’s still wait and see when it comes to what will happen with the trade war.

Corn contracts had a pretty quiet week, mostly just finding spillover support from the soy market. Wheat was on its own little mission with rumours of increased purchases from Asian countries supportive for the market throughout the week. And conflicting reports continue to filter out of Russia — it seems no one quite knows if the country will in fact slow down its export pace.

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