Canola waits for fresh news as contracts trend lower

A number of factors conspired against canola last week, and ICE Futures contracts trended lower for most of the week ended Feb. 1.

However, prices remain range-bound overall and the market did manage to end the week on a minor positive note.

The nearby March contract lost roughly $6 per tonne during the last week of January, finishing the week at $482.40. That took the contract below the 50-day moving average of $485 per tonne, which was bearish from a chart standpoint with the next downside target seen at the nearby lows around $475 per tonne.

On the other side, resistance comes in at $488 to $490 per tonne.

The Canadian dollar rallied above 76 U.S. cents during the week, which cuts into crush margins and makes exports less attractive.

While canola exports continued to lag behind the year-ago pace by about 400,000 tonnes, the weekly data was somewhat supportive with exports during the week ended Jan. 27 hitting their best level in two months.

The release of Statistics Canada’s stocks of principal field crops report on Feb. 5 may have provided some nearby direction for canola. Canola supplies in the country, as of Dec. 31, are generally expected to be up slightly from the year ago level of 13.9 million tonnes. While the report is not typically the most closely followed, it should help provide clarity to the earlier production estimate while also giving a good picture of usage-to-date.

More attention will be on the U.S. Department of Agriculture’s monthly World Agriculture Supply and Demand report (WASDE), which will be released Feb. 8. The USDA will also be releasing a number of reports from January that were postponed due to the government shutdown, and the sheer volume of data could lead to some wide price swings if there are any surprises.

Soybean futures at the Chicago Board of Trade held in a rather narrow range during the week as participants bided their time ahead of the USDA data dump. Trade talks between the United States and China were somewhat supportive because there was talk of large Chinese soybean purchases. However, confirmation was lacking and some buying interest should already be shifting to South America no matter what happens between China and the U.S.

Hot and dry conditions during the growing season cut into the Brazilian crop prospects this year, but the country will still have large supplies to sell that are already finding their way to export positions.

Corn held range-bound during the week as the grain continued to look for some fresh news to break it out of its sideways trading pattern.

Wheat futures are also stuck in a range, although the U.S. futures have seen more supportive news lately. Rising domestic prices in Russia and talk that the country may need to start curtailing exports should be shifting some demand back to the U.S. Meanwhile, the bitterly cold temperatures that hit a large portion of the U.S. winter wheat growing regions during the week raised some concerns about winterkill. While snow cover was likely sufficient in most areas, some damage was likely done.

Kelsey Johnson’s Capital Letters column will return.

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