By Phil Franz-Warkentin and Dave Sims, Commodity News Service
Winnipeg, August 12 – ICE Futures Canada canola contracts were down sharply on Wednesday, hitting their weakest levels in two months as traders reacted to a bearish USDA production report.
The USDA raised its yield and production estimates for this year’s US soybean crop. That came as a surprise to most market participants, as average trade guesses had been calling for downward revisions. Soybeans lost over 60 cents per bushel in the most active contracts, and the sell-off in Chicago spilled into the Canadian oilseed.
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Strength in the Canadian dollar, which was up by about three-quarters of a cent relative to its US counterpart, added to the bearish tone in canola, according to participants.
Speculators were noted sellers, bailing out of long positions. However, farmer selling was likely backing away at the lows, which helped temper the declines.
Ongoing uncertainty over the size of the Canadian crop, given the adverse weather earlier in the growing season, also provided some underlying support.
About 36,098 canola contracts were traded on Wednesday, which compares with Tuesday when 15,273 contracts changed hands.
Milling wheat, durum, and barley were all untraded.
SOYBEAN prices tumbled off a fiscal cliff Wednesday, falling 56 to 61 cents per bushel, after a better-than-expected supply and demand estimate from the USDA shocked the market and led to a huge sell-off.
Heading into today’s report, analysts had pegged US soybean output at 3.719 billion bushels on yields of 44.6 bushels an acre. However, the report forecast output at 3.916 billion bushels on yields of 46.9 bushels an acre.
Favourable harvesting weather was also bearish, as was recent uncertainty in the Chinese economy which could signal a looming downturn in demand.
SOYOIL futures in Chicago plummeted, falling over 100 points.
SOYMEAL futures also suffered steep losses.
CORN futures on the Chicago Board of Trade ended 18 to 19 cents per bushel lower Wednesday, as the USDA also pegged corn output at a higher level than expected.
According to the forecast, 13.686 billion bushels of corn will be harvested this fall on yields of 168.8 bushels an acre. That forecast is well above the predictions pushed forth by traders heading into the release of the report.
The USDA is also projecting lower corn exports in 2015/16 as well. According to the agency, big foreign buyers like China have shifted their attention to alternate suppliers like Brazil and Ukraine.
WHEAT futures on the Chicago Board of Trade, staged a retreat on Wednesday after the USDA said world inventories of wheat at the end of the 2015-16 season would total 221.5 million metric tons. That is well above the traders’ forecast of 218.6 MMT heading into the report.
China’s decision to devalue its currency also cast a bearish tone over the market-place, said an analyst.
Fierce competition from the Black Sea region also pressured prices.
– A new report says 2014/15 Brazilian gain production should top out at 208.8 million tonnes, which is a new record.
– The United Kingdom looks poised for a bumper harvest of 16 million tonnes, according to an analyst.
– So far in 2015, Ukraine has supplied China with 800,000 tonnes of wheat.
Settlement prices are in Canadian dollars per metric tonne.
